The firm projects that banks will lose $112 billion on option ARMs written from 2005 to 2007.

The respite for option ARMs recently is that interest rates have dropped, so loans take longer to reach their cap and do not recast to as high a rate, said Chandrajit Bhattacharya, a mortgage analyst at Credit Suisse. Loans that would have recast this spring will remain at low rates until next year, Mr. Bhattacharya said.

Banks are using the reprieve to help some owners refinance into more conventional loans, said Michael Fratantoni, vice president of single family research for the Mortgage Bankers Association.

But the loans have had extraordinarily high rates of failure even before reaching their reset dates. Ron Dzurinko, 62, who lives on a fixed income in Sacramento, took out an option ARM five years ago without understanding it, knowing only that he could afford the initial payments of $900 a month. “The mortgage person said, ‘It could adjust, but we don’t foresee any major bumps,’ ” Mr. Dzurinko said. “It sounded good to me.”

When his payments shot up to $1,400 last fall, he said, he defaulted on credit cards, took in a tenant and started a vegetable garden, but still could not make the payments. Meanwhile, his home’s value fell below his $260,000 balance. Finally, through a lawyer at Legal Services of Northern California, he was able to get the loan modified to $800 a month  but only after months of calls and rejections.

Mr. Clavon has not had this relief. Sam Hussein, a housing counselor at the nonprofit Clearpoint Credit Counseling Solutions, who has been trying since February to help Mr. Clavon modify his loan, said that even for his eligible clients, lenders have agreed to modifications only about half the time  “and then it’s usually on the lender’s terms,” with payments often increased, at least temporarily, he said.

Amid the wreckage, though, option ARMs have been a boon for some borrowers. Gary Kopff, 64, a retired financial manager, took an option ARM on his Washington home in 2006, increasing his balance to $1.2 million from $800,000. Mr. Kopff chose the minimum payments so that all of his payments were interest, allowing him the greatest tax deduction, and because he had no desire to pay off his home.

But a surprising thing happened. His rate went down.

Mr. Kopff’s rate is tied to a figure called the London interbank offered rate, or Libor, a measure of the rates banks charge one another to borrow money. As the 30-day Libor fell to less than one half of 1 percent, the rate on Mr. Kopff’s loan fell below 3 percent.