My impression is that they really haven’t over the last 3-5 years.
If that is the case, then the real problem with the majority of adjustable rate mortgage holders who can’t make their payments is that they did not plan for a very likely scenario… that their mortgage payment would increase to a specific amount on a future date.
The problem isn’t that rates themselves have gone up. The problem is that these people never really planned to pay them in the first place. It’s not that they never planned to pay the mortgage. They thought they’d be able to refinance again and get a lower fixed rate or another ARM with a lower initial rate. Now many of them can’t, for various reaons.
I’m definitely not an expert (and I went for a low fixed-rate four years ago), but I think the problem is that there were ‘teaser’ rates – especially sub-prime rates. The new rates are much higher than the teaser rates. I suspect that there are three groups of people: Those who didn’t understand at all that their rates would shoot up, those who suspected or knew they would rise and planned to sell their properties for a profit if they could not afford the payments, and those who intended from the outset to sell their properties as soon as the new rates went into effect. Unfortunately they did not think that their houses would be difficult to sell when the rates went up.
Is there really a GQ is here? Haven’t there already been a zillion threads like this in the appropriate forums?
However, if you want to assign blame, you might really want to start with this article from Fortune magazine, which does a much more intelligent job of looking at the big picture.