Their tendency to choose adjustable-rate mortgages is consistent with mortgage decisions based on economic considerations, rather than just lack of financial sophistication.
Other forms of mortgage loans include interest only mortgage, graduated payment mortgage, variable rate mortgage (including adjustable-rate mortgages and tracker mortgages), negative amortization mortgage, and balloon payment mortgage.
As prices declined, borrowers with adjustable-rate mortgages could not refinance to avoid the higher payments associated with rising interest rates and began to default.
Among the new mortgage loan types created and gaining in popularity in the early 1980s were adjustable-rate, option adjustable-rate, balloon-payment and interest-only mortgages.
