Option ARMs lurking as next pitfall in housing crisis

02/1/2008 | Reuters

Mortgage industry insiders say the next chapter in the U.S. housing crisis may center on a type of Adjustable Rate Mortgage that could spell foreclosure for hundreds of thousands of borrowers. Option ARMs allow borrowers to make minimal monthly payments, but the low payments increase the principal. Insiders say mortgage brokers were paid more to sell Option ARMs than traditional loans.

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