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New Mortgages Worry Regulators
http://www.washingtonpost.com/wp-dyn/content/article/2006/06/09/AR2006060900027.html ^ | 6-10-06 | Kenneth R. Harney

Posted on 06/12/2006 8:48:27 AM PDT by Hydroshock

They are the new breed of mortgages, and home buyers in high-cost real estate markets can't get enough of them: interest-only and payment-option plans that cut monthly payments sharply in the early years of a loan.

Lenders have marketed both types of mortgages aggressively -- often to people who need to stretch their incomes to afford homes -- but have said often that their borrowers have solid credit histories and excellent credit scores and that they fully understand the risks once payments reset in a few years. In some parts of the country, the share of buyers using interest-only and payment-option loans has soared from the single digits two years ago to more than 50 percent in 2005.

But federal regulators worry that all is not well. Too few borrowers, they say, really understand the risks involved and have a solid grasp of how the loans work. Within weeks, a team of regulators led by the Federal Reserve and the comptroller of the currency is expected to issue new guidelines for mortgage lenders that could reduce the number of interest-only and payment-option loans being offered.

(Excerpt) Read more at washingtonpost.com ...


TOPICS: Business/Economy; Miscellaneous; News/Current Events
KEYWORDS: andagonyonme; anguish; bubbleboy; cereal; depression; despair; despondent; doom; dustbowl; eeyore; gloom; grapesofwrath; helpme; iluvwilliegreen; imreallytxbsafh; imtomjoad; joebtfsplk; misery; runawayrunaway; skyisfalling; thebubbleboy; williegreenismyhero; woeisme
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1 posted on 06/12/2006 8:48:27 AM PDT by Hydroshock
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To: Hydroshock; ex-Texan

Ping


2 posted on 06/12/2006 8:54:08 AM PDT by Hydroshock ( (Proverbs 22:7). The rich ruleth over the poor, and the borrower is servant to the lender.)
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To: Hydroshock
Too few borrowers, they say, really understand the risks involved and have a solid grasp of how the loans work.

Plenty of free information out there on the pros and cons of these mortgages...so if someone does not know the risks before they sign on the dotted line...it's their own fault. At some point life may let them know what the risks were...
3 posted on 06/12/2006 9:00:34 AM PDT by P-40 (Al Qaeda was working in Iraq. They were just undocumented.)
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To: P-40

Agreed. I know the risks and that is why I would never buy a house that I could not put at least 10% down and afford 125% of teh total payment.


4 posted on 06/12/2006 9:02:01 AM PDT by Hydroshock ( (Proverbs 22:7). The rich ruleth over the poor, and the borrower is servant to the lender.)
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To: Hydroshock

guess you won't be a sucker for "predatory lending".


5 posted on 06/12/2006 9:35:09 AM PDT by Rakkasan1 (Illegal immigrants are just undocumented friends you haven't met yet!)
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To: Rakkasan1

I would pay 20% down if I could. In a few years hopefuly I can.


6 posted on 06/12/2006 9:37:50 AM PDT by Hydroshock ( (Proverbs 22:7). The rich ruleth over the poor, and the borrower is servant to the lender.)
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To: Hydroshock

Neg Am loans today... foreclosure tommorrow.... I love it.


7 posted on 06/12/2006 9:39:59 AM PDT by HamiltonJay
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To: HamiltonJay

Truth hurts


8 posted on 06/12/2006 9:42:30 AM PDT by Hydroshock ( (Proverbs 22:7). The rich ruleth over the poor, and the borrower is servant to the lender.)
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To: Hydroshock

Buying at the height of a bubble with negative amortization; can you say "bankruptcy"? There are going to be a lot of lenders left holding the bag when this whole thing falls apart.


9 posted on 06/12/2006 9:51:27 AM PDT by elmer fudd
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To: elmer fudd

My thoughts are the lenders will scream for a bail out, like the savings and loads in hte late 1980's.


10 posted on 06/12/2006 9:58:21 AM PDT by Hydroshock ( (Proverbs 22:7). The rich ruleth over the poor, and the borrower is servant to the lender.)
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To: Hydroshock

Just remember, should a company sell one of these loans to a minority, and said minority defaults, that will be de facto proof of racist, predatory lending. Seller beware... apparently entering into a binding legal contract does not have the same ramificvations of your claim "ignorance" or "victimization".


11 posted on 06/12/2006 10:03:19 AM PDT by AbeKrieger (A country without secure borders will not long be a country.)
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To: elmer fudd
can you say "bankruptcy"?

It will be interesting to see how the new bankruptcy laws factor into all this.
12 posted on 06/12/2006 10:04:39 AM PDT by P-40 (Al Qaeda was working in Iraq. They were just undocumented.)
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To: AbeKrieger

One of my biggest complaints about schools these days is they do not teach squat about being financially responcible and prudent. To many people do not know enough to make an informed decision.


13 posted on 06/12/2006 10:05:35 AM PDT by Hydroshock ( (Proverbs 22:7). The rich ruleth over the poor, and the borrower is servant to the lender.)
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To: P-40
It will be a shafting of epic proportions.
14 posted on 06/12/2006 10:07:45 AM PDT by Hydroshock ( (Proverbs 22:7). The rich ruleth over the poor, and the borrower is servant to the lender.)
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To: Hydroshock

I learned that at home, not at school. Of course, perhaps schools should be teaching it now, since so many parents are not capable of teaching fiscal responsibility themselves.


15 posted on 06/12/2006 10:09:52 AM PDT by linda_22003
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To: Hydroshock

Last year I refinanced my home w/ cash-out to pay off a loan on another piece of property and to cover upgrades to my home. I took a fixed-rate 5.5% 30-year loan, but the loan officer REALLY tried to push me into one of the 5/25 "interest-only" loans, where you don't pay any principal for the first five years. I asked to see an amortization schedule for the whole loan and they wouldn't provide it. I walked away.


16 posted on 06/12/2006 10:10:40 AM PDT by gieriscm
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To: Hydroshock

Of course, as these borrowers go bust, and the mortgage firm takes the losses, it's all the rest of us that will wind up paying for the sucker loans!


17 posted on 06/12/2006 10:14:22 AM PDT by aShepard (Again!!!!!!!!!!!!!!!!!!!!!!!!!!!!)
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To: Hydroshock
They teach you how you can borrow money to buy all sorts of things but nothing, nada, zippo about using money to invest and have it work for you.

One of my biggest complaints about schools these days is they do not teach squat about being financially responsible and prudent. To many people do not know enough to make an informed decision.
18 posted on 06/12/2006 10:14:39 AM PDT by CORedneck
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To: P-40
At some point life may let them know what the risks were...,/I>

You'd think that they could apply that across the board to where people live too, i.e., flood, hurricane, landslide zones, and have the same principles apply. Yet...

Gimme, gimme, gimme...!

Anyone concerned about these morgages can't possibly have missed the push to get as many Americans as possible to buy homes. Commercials explaining how more people own homes now than ever before, along with the designed means to make it all happen/bring it to fruition, can't possibly have been missed.


19 posted on 06/12/2006 10:19:20 AM PDT by Fruitbat (I)
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To: Hydroshock
One of my biggest complaints about schools these days is they do not teach squat about being financially responcible and prudent.

Parents should be teaching this, not schools.

To many people do not know enough to make an informed decision

You can't legislate ignorance or stupidity.

20 posted on 06/12/2006 10:23:59 AM PDT by petercooper (Attention Libs: Please remove "Haven't gotten Zarqawi" from your DimocRAT talking points.)
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