11-12-2008, 03:33 PM
ARMs were a solution to the people who had bad credit but the government said "you have to be fair and give them a house because they deserve it." then as there 2 year fixed rate came to a close they didn't refinance and they lost the house because they couldn't make the payments. Then because they were foreclosed on the banks took 70% of the property value as a sale which helped to drive the prices of homes down. Thus lowering your property value and then everyone who went to go refinance there ARMs couldn't because the appraisals would come in to low. But I would agree some of it steamed from poor lending policies and aggressive salesmen.