Option ARMs

The US housing crisis has focused attention on ARMs and the danger posed by their spiking interest rates, but mortgage bankers, industry experts and nonprofit officials say that the impact of Option ARMs has yet to be felt. And, they say, it will hit prime borrowers and subprime borrowers alike. People like Bruce Rose, who never should have got a loan. Rose bought his home in Boston in 1986. After stress and depression forced him to retire as a state employee in April 2006 he maxed out his credit cards on his annual income of around $16,000. On medication, he refinanced his debts through Countrywide (who else?). The new loan totaled $439,000. Rose said he did not know his mortgage broker and Countrywide used a stated income loan -- also called a "liar loan" because no proof of income is required -- and that they claimed his monthly income was $12,166. "If I had known what I was signing I would never have agreed to the loan," he said. "Now I may lose my home." With an Option ARM, borrowers can make a minimum monthly payment like a credit card, but if they do the principal increases. Rose's minimum payment rose from $1,200 a month to $2,800 and his loan now totals more than $500,000. He is fighting foreclosure. "No reasonable lender would have given him a loan like that."

If the story is trying to evoke sympathy for Mr Rose, it fails miserably. He didn't know what he was signing? He didn't know he couldn't afford a $439K mortgage on an annual income of $16K? I'm sure he took cash out (probably several years worth of income) when he refinanced; he didn't understand he'd have to pay it back? Did he think the mortgage fairy was giving away money? Gimme an effin' break!