James,
Most of these buyers received a 'teaser rate' - a very low rate that was set for a short period of time (usually no more than 5 years) and after that teaser rate was adjusted 'accordingly'. Well, if you got a 2% rate, I can pretty much guess which way that rate is going when it needs to 'adjust', right? And these adjustments are causing people to be late on the mortgage or just unable to meet the new payment period. Which of course then leads to foreclosures and the domino effect from there that we are seeing now.
Most of these mortgages here are referred to as a ARM - Adjustable Rate Mortgage. Even in the name of the loan it tells you what may happen.
