In states having the greatest of home price increases early this decade (Arizona, California & Nevada) the Option Adjustable Rate Mortgage (or, Option ARM) was a popular way for marginally qualified borrowers to get into a new home. These loans also appeared in Cochise County.
An Option ARM allowed the borrower to pay any amount above a minimum set by the lender that was less than normally amortized interest. The majority of borrowers (90+ percent) opted to pay the minimum which meant with each payment, the total owed on the property increased since no principal was being paid and the interest shortfall rolled back into the loan adding to the loan amount and itself now accruing interest.
