Problems associated with ARM’s don’t apply to Government Backed ARM’s

There is no reason you shouldn’t feel good about selling Government backed ARM’s

Let’s examine the reasons why ARMs became a problem.



· Subprime Arm’s had large margins and jumped up as much as 6% or more in the first adjustment period. This problem does not apply to Gov. ARM’s! UWM’s Gov. ARM only has a 2% margin and can only adjust up or down 1% per year and 5% lifetime.



· Subprime Arms had pre-payment penalties that prevented borrowers from refinancing to lower rates. This problem does not apply to Gov. ARM’s. Government ARM’s have no pre-pays and allow you to streamline into a fixed rate any time and as many times as the borrower wants. You can even streamline into a better ARM rate.



· Home values went down preventing refinancing. This problem does not apply to Gov. ARM’s. Streamlines don’t require an appraisal. After 3 years your borrower will be able to roll in their costs on a streamline without and appraisal.



· Income decreased and the borrower didn’t qualify for a refi. This problem does not apply to Gov. ARM’s. Streamlines only verify employment, not income. Even if the borrower lost his/her job, all they need is to be employed anywhere, with any income. Even if they retire, they can still streamline.



· Many ARM’s are “Interest Only” and borrowers balances never went down. This problem does not apply to Gov. ARM’s. Government ARM’s are always Principal and Interest payments. In fact, your borrowers will pay more Principal in an ARM since it’s at a lower rate. Which means, when it comes time to streamline, you won’t have to share your yield spread with the borrower. You will have room to roll in their costs, even with out an appraisal.



Don’t let the misguided stigma of the ARM stop you from educating your borrowers on the Government Backed ARM’s. ARM’s are an effective tool to help your FHA borrowers save real $$$$$ and to help you write more loans!