Give Me a Hand. Wait, No. Give Me the Whole ARM

"No job? No income? No money? Want a house?"
"Why yes, that would be lovely."
Lenders had a simple job in the recent past, to make dreams come true for relatively short periods of time (6 months, maybe a year). As a result of the excessive number of people defaulting on their mortgage payments (primarily due to ARMs), some overdue measures are being taken to guarantee the solidity of new loans. The first article discusses MGIC's new loan requirements/restrictions that will soon take effect. The second article sheds light on how loans were given out to buyers who turned out to be less qualified than they were deemed.

Changes by Key Underwriter put a New Squeeze on Market
The oldest and largest private insurer of home loans -- the Mortgage Guaranty Insurance Corp. -- issued a bombshell warning Feb. 6 that, in large parts of the country, it would no longer provide coverage on popular cash-out refinancings, reduced-documentation loans, mortgages with down payments of less than 5%, loans for rental houses or other non-owner-occupied investor properties, and mortgages with negative-amorti- zation features, such as payment-option loans. The bans, which take effect March 3, cover four states in their entirety (California, Arizona, Florida and Nevada), plus the District of Columbia and 25 other major real estate markets including Denver, Baltimore, Boston, Chicago, Detroit, Minneapolis, the Long Island and New Jersey suburbs of New York, Portland, Ore., and Tacoma, Wash.

Subprime Loans Defaulting Even Before Resets
It turns out that massive interest rate spikes aren't the problem -- many borrowers couldn't afford these mortgages even at the low, introductory interest rates.

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