Economists Brace for Worsening Subprime Crisis : NPR - 1 views
-
lenders repurposed "creative financing" products that had previously been marketed to high-income borrowers seeking flexibility with their money. Among the most popular were variations on the adjustable-rate mortgage, or ARM.
-
ARMs are loans whose interest rates adjust up or down periodically. The initial rate is typically fixed for a period of two or three years. The benefit is that the starter rates are lower for ARMs than for traditional, fixed-rate mortgages. That means lower monthly payments, making homeownership more affordable and allowing borrowers to qualify for a bigger loan.
-
payment-option loans
- ...3 more annotations...
-
Lenders created variations on the adjustable-rate mortgage to attract a growing pool of borrowers, especially homeowners. Adjustable-rate mortgages have interest rates that adjust up or down periodically, with a fixed rate for a period of two to three years. The starter rates are lower than the traditional starter rates, which makes homeownership more affordable and borrowing more easier.