An ARM loan, Loan Amount = $250,000; Monthly Payments, Index = 1-Year Treasury bill. Index at the end of year 1 is 7%. Index at the end of year 2 is 6.5%. Index at the end of year 3 is 8.0%. One Year Adjustable, Margin = 1.50%, Term = 30 years. Interest Rate Caps: annual 2% and life 5.5%, Teaser Rate = 5%. The loan has negative amortization. Mortgage rate in year 2 6.5% 7.5% 7.0% 5%