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Volume 18 - Number 1

January 10, 2014

Economics Drive Low-Rated Borrowers to ARMs

The tendency of borrowers with low credit scores to choose adjustable-rate mortgages over fixed-rate loans is more about economic considerations rather than a lack of financial sophistication, according to a study by Federal Reserve researchers. In the study, Fred Furlong, David Lang and Yelena Takhtamanova looked at factors that influenced lower-credit borrowers to select ARMs over fixed-rate mortgages during the housing boom in early 2000. In general, the research team observed ...

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