Mortgage Problems Ahead??

I knew that many folks were taking out adjustable rate mortgages (ARM) which will result in higher monthly payments if interest rates go up--which they are doing at the lower end and long rates should follow. That would scare me, but I recently read of a home mortgage product called an option ARM that would terrify me. With an option ARM, the borrower has the option to make minimal monthly payments which are below what interest only loans would be. This means that the balance of what is owed keeps going up even if rates stay the same. This is called negative amortization. It also means that if interest rates go up beyond what is manageable for the borrower and there is a coincident decrease in home values (don't believe it can't happen), the so-called owner will be forced to sell at a loss or simply walk away and let the lender have the house. If this happens on a large scale, the victims will not only be the borrowers and the lending institutions, but all of us will suffer since Congress will step in and bail everyone out with our money.