[free_at_jsl.com]

They opted for an interest-only, adjustable-rate mortgage

first mistake.


No kidding! Just when did they expect to PAY for their house? If they were only meeting the INTEREST payments and could not afford to pay down the PRINCIPLE, then they had no business taking out the loan in the first place. ARM loans have ADJUSTABLE rates (hence the 'A' in ARM). Anybody who gets one must understand that the rate might go up in the future. Anyone who knows any history knows how high they have gone in the past, and may go again.

[rebel_yell2]

Greenspan recently wrote an article (UFB! with coauthors) about how overpriced 30-year fixed rate mortgages are relative to ARMS. Rates may spike for a couple of years, but, over 30 years, you are much better off with an ARM, IF you have the cash reserves to cover any spikes.