Yes, we will always see ARMs in the picture. And it is up us to inform our clients as best as possible about the harm the ARMs. We are not experts (ok...maybe some) in the mortgage industry yet we cannot expect the mortgage brokers or lenders to educate them fully where they would comprehend the ramifications of their actions.
--Borrowers who couldn't qualify for a set rate mortgage applied for and received ARMs, even though they fully knew that they'd never be able to afford the payments once the rates adjusted.
--Lenders pushed ARMs, knowing how to bundle up a lot of sub-prime loans and sell them off for big profits. (Read "The Big Short" by Michael Lewis.)
--Real estate agents were willing accessories to the process, not really caring whether the buyer could afford the property, but just caring about whether the buyer could qualify for a mortgage.
Just a side note: I bought a home with an ARM in 1985. The interest rate was 8%. The provisions of the ARM let it move up or down by up to 1 percentage point a year, within a range of +/-4%--so it could vary between 4% and 12%. Some years, it's gone up a bit. Some years it's gone down. For the past couple of years, it's been at 4%.
There's nothing wrong with ARMs. Just with people who misuse them.
Charles Rutenberg Realty
We have already seen one thing poking its ugly head out of the sand where it was buried for many years and that is Rent To Own aka land contracts. The number of people out there bringing up that subject has gone way up over the last 2 months. This is because the lenders have tightened up who they will loan to and they did this back in the mid 1980's - if you were doing real estate then, I was. The ARM's also came out and so I guess you will see them as rates creep up. I can remember fix rates in late 80's of 6% and ARM's at 4% with 2-6 caps. In a couple years you would be over the fixed rate, but people bought them.