Study predicts one in eight recent ARMs holders will default.

First American Real Estate Solutions, a unit of title insurer First American Corporation, released a study of households that originated Adustable Rate Mortgages (ARMs) in 2004 and 2005. The Wall Street Journal reports that the study predicts that one in eight of these households will default on their mortages as the rates go up.

Many of these mortgages were made at subprime rates, and were designed to give people lower monthly payments so they could qualify for larger mortgages. These borrowers often have to stretch to pay the lower rates, and when their mortgage is adjusted to higher rates, they will be unable to meet the increased monthly payments.

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