Despite Concern, Lenders Still Pushing Option ARMS

by Alex Stenback on April 19, 2007

Lenders Like Quicken Still Aggressively Pitching Option ARMS

As the ad posted above played on CNBC this AM, we thought to ourselves, "Self, I can’t believe these guys are pitching option-ARMS this way.  Talk about stupid."  Then, as if on cue, we see a piece in today’s Real Estate Journal that points to growing concerns about the the option ARM market.

Investors aren’t panicking
over option ARMs, but they are signaling greater concern about how well
borrowers will cope with the eventual jumps in payments that many face…[snip]…For some borrowers, option ARMs are ticking time bombs.

These loans, in our view, are suitable for a only very small slice of the borrowing public; specifically, those of very high credit quality with high net worth, who use it as a tool to manage cash flow. An option-ARM should NEVER be used simply to be able to afford a mortgage that under normal circumstances would be out of reach; that is just stupid and asking for disaster.

The problem is, many lenders continue to offer sell aggressively pitch these loans as a magical affordability solution.  Look how low your payment can be! You can save thousands!

We are calling BS, think the practice is reprehensible, and Quicken (which holds itself out as a purveyor of sound personal finance solutions) ought to know better. Secure advantage? Yeah, right.
ยท Option Arms Emerge as Home-Loan Worry [REJournal]

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Technology Evangelist
April 27, 2007 at 5:15 pm

{ 2 comments… read them below or add one }

Chuck April 21, 2007 at 4:32 pm

Who does Quicken usually sell (off-load?) these loans too?

Other blogs are reporting that the buyers are drying up for this kind of “paper”.

Perhaps Quicken will go the way of New Century.

Chuck April 24, 2007 at 7:57 am

Alex, your readers might find this article about Pay Option ARM loans informative:

The article’s author hosts this informative site:


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