The FDIC is proposing to permanently freeze the adjusting Subprime ARM rates. They're wanting the mortgage servicers to keep it at the initial rate, and to convert it to a fixed rate mortgage. The call has been made by the Chief Bank regulator after thousands of homes being foreclosed.
ARMs have a low start rate which is fixed for a certain amount of years. It then adjusts to the index chosen by the mortgage lender, and may increase by 1-3%. About 1.3 Million SubPrime ARMs are due to adjust between now and 2008.
FDIC to mortgage servicers: Freeze ARM rates