12/21/09 Baltimore, Maryland – Our economy is about to relapse into the disease that sent us into the Great Depression: Part Deux. Subprime loans caused the initial illness. Option-ARMs will cause the relapse.

In the first half of the past decade, subprime loans were king. They were cheap and easy to get approved. Along with the subprime boom came subprime adjustable-rate mortgages (ARMs), which were equally easy to afford…for a while.

Of course, the “A” and the “R” in ARM meant that the interest rate borrowers pay changes, or resets. The majority of these resets occurred between the summer of 2007 and the summer of 2008.

This period saw a massive amount of mortgage interest rate hikes, which caused millions of foreclosures. Things spiraled down from there, eventually freezing nearly all credit and causing the panic of 2008.

Of course, that’s the 50-cent version of recent history. There were plenty of other financial calamities that went along with this, including the bundling of mortgage-backed securities and risky derivative products.

If you believe the Obama White House and the glass-half-full press corps, you’d think this mess is now behind us. We are, after all, in a recovery…right?

Unfortunately, no one is talking about the second wave of ARM resets and foreclosures…

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