Consumer Profiles and Acceptance of ARM Features: An Application of Logit Regression

In recent years, mortgage lenders have encouraged borrowers to choose adjustable rate mortgages (ARMs), and regulators have allowed lenders wide latitude in determining mortgage features. Through analysis of survey data, this paper examines borrower characteristics and attitudes related to the choice between fixed and adjustable rate mortgages, providing information lenders may use to increase homebuyers' willingness to accept ARMs. Results indicate that, while some ARM features are unattractive to almost all potential borrowers, response to other features is affected by age and income expectations. Thus, there is support for maintaining a variety of mortgage features to appeal to different categories of borrowers.