Back then, 85 percent of commercial-bank mortgages were for terms of only three or four years and were not fully amortized, ending instead with balloonpayments that usually required refinancing.
As the rates rose, people who had taken on balloon-style mortgages - thinking they could easily pay the initial rate - found their payments being increased and suddenly... they couldn't pay.
A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.