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 ...
I agree with you on the parents, but the problem with many is that they do not know this either.
You can't legislate ignorance or stupidity.
I don't expect democrat/liberal dominated schools to teach anythiing but be dependent on the government as part of their overall plan of failure. They try and legislate for the ignorant and they try and keep the ignorant in their pocket. God forbid students/people should become succesful and not need to depend on the government for their next handout.
"One of my biggest complaints about schools these days is they do not teach squat about being financially responcible and prudent."
Well, they sure never taught economics when I was in high school, but that was fifty years ago. It hasn't been too long since I read some educrat saying they didn't teach high school econ because economics is 'too depressing.' Don't worry, spend and be happy.
The high school econ I got was all therory. Kinseyian theroy, macro and micro econ. Nothing of practical value to most people.
In my 20's I almost got one of those awards. I know better now.
"Kinseyan" theory would have to do with sex, not economics. You couldn't possibly mean "Keynesian" theory, could you? ;-D
That is one of the reasons I post these things, trying to teach.
These types of loans are based on an assumption that the mortgaged property will appreciate. When and if the market dips, foreclosures will skyrocket and taxpayers and honest, hard working homeowners will be left holding the bag.
Sorry, my Freudian slip is showing.
I fear that as well, it would not suprise me one bit to hear of a large number of people just walking away from their house next year.
You think there is a problem with someone who makes 50k getting an interest only loan on a 700k house? :-)
I do not care about them. If they wish to debate, great. If not they mean nothing.
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.
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About a year ago, my stepdaughter and her husband sold a house in which they had lived for about ten years. I thought they paid too much when they bought and was amazed when they sold it for about a fifty percent higher price (nominal dollars). I think they made a great buy in the house where they live now. I just learned a few minutews ago that their old house has been repossessed. It seems that the lady who bought it had not made even one payment and had trashed the old house, rooms half painted etc. I hear that a lot of this sort of thing goes on in this state. The house probably needed at least fifty thousand dollars in repairs when my stepdaughter sold it but it was approved as it was except for some very obvious things that had to be done before the sale. It needed a lot of repair when my stepdaughter bought it and that is one reason I was so glad to see them finally get out of that hole.
Well, they sure never taught economics when I was in high school, but that was fifty years ago.
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I graduated forty four years ago and there may not have been a classs called economics but there was business math etc. We all learned to understand interest rates and such, the basic information was available if anyone wanted to learn. One problem is the basic exuberance of the young, they tend to think nothing bad can happen to them until it is too late.
You think there is a problem with someone who makes 50k getting an interest only loan on a 700k house? :-)
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Naaaahhhhhh.
You're right. I forgot about that. I suppose it was my grades that landed me in business math in the ninth grade, but I'll tell you what. I was able to use what I learned there a lot more than the kids who 'made it' into geometry. I later went on to excel at algebra, even used it some in my professional life. But I didn't miss geometry and still don't.
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