ARMs today are less risky, thanks in part to borrower protections established by the Dodd-Frank Act, according to Ricard Pochkhanawala, senior policy counsel at the National Center for Responsible Lending. Dodd-Frank required lenders to fully document a borrower’s income and assets and their ability to repay an ARM before the loan was made, and it said that borrowers must qualify for the loan based on the fully-indexed rate, not the introductory or “teaser” interest rate.
Dodd-Frank was enacted more than a decade ago, but I mention it because its protections are a valuable reminder that when it comes to taking out a mortgage, it’s up to you, the borrower, to decide whether the loan is right for you.