This is not the bottom. There is roughly 2 trillion dollars worth of 2 year and 3 year arms that are set to adjust is 2008/2009. Things will get worse before the get better IMO.
You are correct. We’ll see the bottom some 18 to 24 months after the Fed begins cutting the Fed Funds rate next month.
That is true. However, if the economy stays good, and interest rates don't shoot up, most of those borrowers aren't going to default.
ARM loans are often popular with younger home buyers which see relatively large growth in income in earlier years of their careers, and their incomes will likely grow much faster than their mortgage payments.
If the housing market is doing ok, many of those who are unable to afford their payments will be able to sell their homes rather than defaulting.
There was an unreasonably high amount of high risk loans that were made, and lenders are going to continue to pay the price for that. However, the market has already taken that into account to the point where investments that had only a relatively small exposure to such bad loans have taken big hits.
We are far from through this mess, but it looks like we are past the worst of it.