[ex-Texan]

The Fed is clamping down on risky mortgages. In places like D.C., risky loans have fueled real estate markets into a bubble that is about to burst. The economic shake out will begin for real in about six months. [Helpful site here] By the end of next year, people will be lining up to buy foreclosures. 'Nuff said.

[jiggyboy]

Local mortgage brokers say borrowers are taking out these loans because it is the only way they can afford to buy a home today.

This statement is beyond transparently stupid. If the only way to buy a home is with a suicide loan, then you can't afford that home. It's that simple.

And if home sales are stagnating, it ain't directly because these loans aren't available, it's because the price of the home is too high. That's simple too.

[sully777]

LOST ANOTHER HOME TO DIE-TEK's INTEREST-ONLY SCAM

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[Alex Murphy]

The economic shake out will begin for real in about six months. [Helpful site here] By the end of next year, people will be lining up to buy foreclosures. 'Nuff said.

Most of the foreclosed-on homes in my area were in disrepair long before the actual foreclosure. I'd say their (former) owners were unprepared, financially or socially, for the responsibilities of ownership, and demonstrated it by taking out an ARM or interest-only mortgage to begin with. The banks were equally as irresponsible for approving such loans when the individuals' earnings histories show an inability to meet increasingly-higher commitments. Foreclosures will cost the banking industry dearly, too, since they loaned the money out and will have to sell the now-downtrodden properties at a loss.

On a brighter note, Hopefully the foreclosure aftermarket will place more responsible individuals in those homes, which would benefit everyone involved.

[lewislynn]

As the real estate market slows, some mortgage lenders are trying to prop up profits by relaxing lending standards for certain types of loans, endangering borrowers and financial institutions, a top banking regulator said yesterday.

LOL! What's wrong with this picture...Oh I know, relaxing lending standards for certain types of loans, isn't illegal.

Wouldn't you like that "top banking regulator" nanny job ex-Texan so you can save us all from ourselves by stopping this mortgage lending nonsense?

[Polybius]

About two-thirds of all people who bought homes in the Washington area in 2005 used interest-only or option mortgages, ............. "Without these products, homes couldn't be purchased. If they are taken off the market, it could precipitate a disaster of epic proportions."

These gimmick loans have artificially jacked up real estate prices so high that "it could precipitate a disaster of epic proportions " if buyers were actually forced to pay anything on the principal.

In other words, these people will never actually own their own homes.

"Saint Peter don't you call me 'cause I can't go. I owe my soul to the Savings & Loan."

[nmh]

Good post!

Some may not like the truth you post through reputable newspapers (even if they are left leaning). Even right leaning papers are saying the SAME things. My best guess is that they are sweating it out with THEIR interest ONLY loans on houses they can't afford and don't want it rubbed in their faces. If you looked under their chairs ... I'd bet you'd see HUGE brown spots as they sweat it out.

[nmh]

Again, The Washington Post is RIGHT on this issue:

"A variant, called option adjustable-rate mortgages, allows borrowers to decide how much they wish to pay each month and whether they want to pay down the principal. The risk in interest-only and option ARMs, however, is that at a future point, the loan payments are recalibrated to make up for payments not made during the early phases of the loan -- and could double in a single month."

"These loans also pose the risk that people could end up in homes with higher mortgage balances than when they were bought."

I can easily see this happening. They can't pay the interest on the INTEREST ONLY loans once they GO UP. I can easily see in a former "hot" market they paid MORE than they should and then coupled with HIGH interest rates, bail out and OWE MORE than the HOUSE IS VALUED.

I see prices going down in New Jersey and this is NOT a cheap state in property/land and the HIGHEST in the nation for taxes. More and more "reduced" or "new price" is becoming more common in you better neighborhoods.