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 ...
Ping
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.
guess you won't be a sucker for "predatory lending".
I would pay 20% down if I could. In a few years hopefuly I can.
Neg Am loans today... foreclosure tommorrow.... I love it.
Truth hurts
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.
My thoughts are the lenders will scream for a bail out, like the savings and loads in hte late 1980's.
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".
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.
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.
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.
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!
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.
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.
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