Readers want to talk about adjustable rate mortgages. "ARM is pretty scary stuff. One may say 'oh the interest rate only went up by a few percent!!' (1) Say, you purchased an over-priced but normal $750K house in California with 2.00% APR interest only ARM… (just to be cool, of course, no downpayment). Your monthly payment is only $1,250. not bad… not bad."

"(2) Come ARM reset, say additional 2.00%, bringing the total rate to 4.00% or 2x the original. (3) Now your payment’s $2,500 (4) Soon, it will be 6.00%; that’s $4,500… INTEREST ONLY…oops. Ps: don’t forget to add $700/month for tax, a few hundred more for blah, blah, blah..ouch!"

Another put a finer point on it. "Here are the actual numbers for your example. $750,000, 2.0% year one $1250 (actual accrued rate 7.7% current), year two payment $1343 (7.5% increase in the payment, balance up to $792,000), year three payment $1443 (balance up to $837,000), year four payment at 7.7% for 27 years- ———$6,147 ouch."

Another replied, "I was a Math major in college so when I shopped for a mortgage it was easy to see through the 'adjustable' problem (especially because if you have a fixed mortgage you could always re-fi if rates dropped. And if you’re not stupid you’d refi for the remaining balance and not try to pull cash out.)"

"Adjustables only make sense if you actually have the cash in the bank to pay off the loan if you need to! Then you can take advantage of a low teaser rate for a few years. The mortgage industry simply takes advantage of the fact that people don’t do the math and realize that their $1250 payment can become $6147 in a couple of years…."

One had this to say, "Don’t mistake a plain vanilla adjustable rate mortgate with the exotic ones, such as the option-ARM, interest only, and teaser rate loans. A regular ARM makes a lot of sense when interest rates are high."

And lastly, "Should figure NegaAm for five yrs with a recast of the loan if and when it gets to 110% to 125% (depends on bank) of the original loan. The bank can authorize an appraisal at any time."

"The cap on the loan could be as low as 9.95% or as high as 12.95%, in a rising interest rate, declining house value - expect to see more recasts as a result of value. Eg, I buy in housing development for 500K cash, friend buys similar unit same development 95% NegAm 5% down. I hate the 1 hr drive and decide to sell at any price. First offer is 425,000 I accept! All negam borrowers in the same development are subject to the new appraisal. Sayonarra."

The US News and World Report. "Call it the worst worst-case scenario. The interest rate on your adjustable-rate mortgage jumps just as the housing market enters a prolonged slump."

"Then something really bad happens: You lose your job. There's a medical emergency. You get divorced. You fall behind on your mortgage payments, and the bank forecloses on your home. Those scenarios are now playing out for growing numbers of homeowners."

"In the past, foreclosures have largely been the result of a bad economy. Yet this time around, with a record number of borrowers exposed to rising mortgage payments through adjustable-rate and subprime mortgages, the increase in foreclosures could be a bad omen."

"Adjustable-rate mortgages worth over $1 trillion are due to reset in the next two years. 'We've never had such a high percentage of loans come due at the same time, so no one really knows what will happen,' says RealtyTrac's Rick Sharga."