Are ARMs a risky business today? ? FEATURED QUESTION

Question

After all the turmoil that was blamed on "teaser rate" mortgages, we are seeing 5/1 ARMs with APRs under 3%.  Is this going to cause another wave of foreclosures in 5 years when these things reset?

Answer 1

ARM's are NOT risky.  Given today's debt problems and anemic economic growth prospects, ARM's can help homeowners keep their low monthly payment and help their cash flow.  Most ARM's were quoted "risky" because the margin charged on top of the index on the loan.  Today's margins are very low and the adjustment increases are very low.  No reason to be afraid of ARMS...