Risky mortgages drove the prices of housing up by allowing people to qualify for houses they couldn't afford..now they will drive them down and everyone is going to suffer.
No money down..low starting interest..no allowance for taxes etc.
These were all bad practices that must come to an end.
10% down minimum..plus escrow accounts for taxes and no promotional rates or negative amortization. That would trim house prices and make them a lot more affordable and encourage saving for down payment.
Historically lenders will screw the consumer if left unsupervised by government. The Bible even acknowledges that the lender will be used to enslave you. (Check out Proverbs).
the ponzie scheme was just this:
1. buy maximum house on mimimum payments and no money down
2. wait 2 years for appreciation or flip to a new buyer
3. move up to bigger house with mimimum payments and no money down
All of this is dependent on home price appreciation and a steady flow of buyers. Now that sub-prime lenders are tightening standards, and there are fewer buyers who can not really 'afford' the entry costs with even the riskiest most toxic loans, the conveyer belt is jammed and support for these prices is disappearing.
Now you're talking!
If the financial institutions wouldn't finance these outrageous prices or at least require folks to be able to afford the monthly payment, we would see real affordable homes.