A decade after their heyday, adjustable-rate mortgages (ARMs) are gaining prominence.
According to CoreLogic, the share of the dollar volume of ARM originations climbed to 8 percent in the first quarter, up from 6 percent in Q4 2016, and up from 2 percent in mid-2009. Before the housing bubble burst, ARMs had a 45 percent share in mid-2005.
The share of ARMs typically rise when the shares of fixed-rate mortgages (FRMs) fall, and vice versa. ARMs are also more common with buyers that have large-balance mortgage loans rather than smaller loans, and they are popular with buyers who are income-restrained.
Unfortunately, ARMs received a bad reputation since those originated during the pre-crash period were more likely to default than FRMs. Underwriting standards were relaxed during the boom period as numerous risky products were available.
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