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obtained financing were created.

Adjustable rate mortgages

ARMS became the buzzword of the nineties. These lower interest loans allowed more people to qualify for mortgages. In effect an adjustable rate mortgage is much like your credit card, the rate starts off low and over time increases. Initially adjustable rate mortgages were intended to be short term loans, allowing a potential homeowner to qualify for a loan, build up their credit reporting history, then go to their local bank for a standard mortgage. Unfortunately, all too often these adjustable rate mortgage notes contained fine print that included prepayment penalties, frequent changes in rate, and other hidden clauses.

For those borrowers who were first time buyers, those who were self employed, or those buying their first home these mortgages were extremely attractive. Many borrowers discovered very quickly that these loans were nothing but nightmares. In many cases the interest rate increased three months after the start of the loan. For those homeowners their mortgage payments took a significant jump shortly after the start of their mortgage. In the event that the borrower lost their jobs, became ill, or had other significant life changing factors what should have been the American dream turned into the American nightmare.

Sadly, in this day and age people spend more time reviewing their car loan contracts which typically only last three to five years than they do reviewing their mortgage documents which they're going to be paying for twenty to thirty years.

It would be unfair to suggest that every loan that did not have a fixed rate is a problem. There are thousands of homeowners who have successfully navigated the adjustable rate mortgage. Unfortunately these mortgages were not always offered to borrowers who were financially savvy. Instead, unscrupulous mortgage brokers took interest in closing the loan. All too often these mortgage brokers had one goal in mind get the loan closed.

Enabling financial institutions

It would not be entirely unfair to place some of the blame on Congress. While the housing market was creating its bubble, Congress in their infinite wisdom encouraged additional lending and recommended to many institutions that they consider loosening their lending standards. It is however important to note before you blame Congress entirely that loosening lending standards was not the main cause of the subprime mortgage prices. Not that Congress is without blame mind you, with a lack of

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