Payment shock high on new adjustable mortgage

How borrowers get into trouble

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

"Bear Stearns is offering what they call a "Secure Option ARM" on which the starting interest rate is fixed for five years. Your opinion?" I have mixed feelings about this new version of a mortgage that is now causing enormous grief among many people who have them. During 2005-2006, about half a trillion dollars of option ARMs were written, and many of those who took them are very unhappy today. No day goes by that I do not hear from option ARM borrowers who are waking up to the realization that they have a tiger by the tail that is soon going to bite them. The very low mortgage payment that sucked them in has resulted in a growing loan balance, and soon their payment is going to jump to the level needed to pay off that swollen balance. The payment increases that loom on their horizons can be frighteningly large, and most of those who write me are justifiably frightened.  What these borrowers can or can't do to extricate themselves is a topic for another article (or 10). The ...