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"March 4, 2004, Greenspan personally told people to use ARM loans."

Here is a FACT: For the last 20 years ARM loans have given people LOWER house payments, than fixed rate mortgages.

Reason: They took the RISK, and reaped the benefit of a low interest rate environment.

A few further facts:

1. Actually buying foreclosure properties takes a lot of knowledge, and the financial ability to pay cash in most cases.

2. Properties which are taken back by lenders will be marketed by same at full market prices.

3. Real estate is a long term deal.

The option ARM loans being advertised locally use teaser rates of 1% and 2.5%. With the lock in rate set in three years at 6.8% APR plus hidden costs (works out to about 7.3% APR). On a $ 300,000 loan that means the buyer is deferring as much as 5.8% of unpaid interest a year. That means that each year the buyer pays the minimum the lender is adding $ 17,400 to the balance owed. In effect, the buyer has a negative amortizing loan. In three years, he will owe about $ 350,000 on his home.

What does the buyer do in 2008 when his house is worth only about $ 225,000?