Darn lenders wanting their money back. You take away the ability for lenders to put higher cost mortgages in place you will take away their interest in financing higher risk loans. This is where Fannie and Freddie are just starting to pick up the slack with lower downpayments and credit scores. They will of course have - surprise - higher delinquencies. Good post.
Six months ago, I bought a house for $428,000 here in Woodland Hills, a nice Los Angeles suburb. This is known as an "entry level" house, or a "steal" in our vernacular. To give you an idea of how much of a steal it is, three different real estate agents have told me it would sell for at least $550,000 today.
You can't rent a single apartment here for the $539.33 their mortgage was including the monthly cost of property taxes. My mortgage, at 100% financing, is $2,750 a month. I can only say they got a horrible deal, since their house cost almost exactly 10% what mine did; my payment would have been $4,400 a month (!) at the same interest rate.
If the process is anything like what I went through to buy my house, they'd have to be pretty dumb not to know what the property taxes would be and how much the total cost with property taxes were. I had this on a spreadsheet that I updated frequently during the buying process.
I'm afraid the lesson is that people who aren't reasonably knowledgeable about the workings of mid-finance have no business buying homes :-(.
D
And pray tell, why is the media not coming down on the county for its astronomical tax burden on these people? Why should the government tax people out of their homes, should be the question.