"They're known as 'pick-a-payment' mortgages or option ARMs, but their detractors call them pure poison. Now their default rates, which are already high, are about to explode, according to a Fitch Ratings report issued Tuesday.
Option ARMs are loans that allow borrowers to make very low minimum payments that don't even cover the interest for the loans. The difference is then added to the mortgage balance, which grows every month.
There are about one million option ARMs outstanding, according to Fitch, and somewhere between 10% and 24% of these are seriously delinquent - 90 days or more past due."
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Pick-a-payment loans turn poisonous
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