" PS. What your home is worth today is irrelevant unless you sell it today. "
The current value of your home is very relevant to the bank that actually owns it.
When all of those "creative" mortgages come to their balloon or higher-payments points, and people find out that they can't refinance, (as promised as a 'selling point') and can't sell, and can't make the payments --
Can you say "Banking Crisis"? (Hint -- the S&L bailout was a sandbox game compared to what could happen, here)....
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus
Pardon my ignorance, but what is a balloon? What is a "higher-payment point"?
Are you saying that banks in SoCal were making home mortgages with non-constant monthly payments, i.e. monthly mortgage payments that increased over time?
Yikes. Not where you'd want to be in a tight market [as the homeowner/mortgage payer], if, say, you unexpectedly lost your job...
Could happen. I'm covered as are my family members. God alone knows about my neighbors, many of whom bought into the area at price points that are a multiple of what we paid. I know a few that are just getting by now, with both working. I'm sure that some banks are going to take a hit.