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This economy is now full of adjustable rate whatevers.
These loans were important so that people who could never own a home could, instead, buy one. Or so that people could buy homes larger than they could afford. These groups cannot refinance because they could not afford the home in the first place. And now they cannot sell them because housing prices were significantly inflated by these ARMs and by Fed interest rates that were too low.
Meanwhile getting people into homes no matter what may be widespread. Fannie Mae and Sally Mae may be under investigation by the NY Attorney General.
Another looming problem resided in credit cards. In America, everyone is familiar with the Capital One credit card. Get everyone to transfer their credit card debts to Capital One with its low interest rates. Then when they miss anything completely unrelated to that Credit Card (ie the electric company bill is late), then that Credit Card interest rate increases massively. Now these debtors have seriously increasing debts.
GM is also guilty of playing such games. To maintain sales of poor products, GM simply tapped on of their remaining profit centers - GMAC - their financing company. By offering loans at zero percent, GMAC was simply giving free rebates on grossly overpriced GM cars. When do those losses appear? Four and more years later. Today GM admitted that GMAC is no longer a profit center. Duh-h-h-h.
GM was mortgaging GMAC on a hope that GM profits from cars would return. Maybe if car guys were designing their cars. Now GMAC is no longer a profit center.
GM was holding back on massive losses in a hope that GM would be able to write those losses off on those future profits. Well those not lying to themselves should have seen products not be profitable. GM had to finally concede to those losses - could no longer play spread sheet games to mask those losses. What surprised analysts are how much larger those losses are. Another money game exposed - along with these Adjustable Rate Mortgages and the looming credit card crisis.
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