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.: August 2006 --> Mortgage insurers ask Feds to restrict risky loans

Mortgage insurers ask Feds to restrict risky loans

» Mortgage insurers are so alarmed by the proliferation of interest-only and "option" mortgages, they are asking Federal regulators to restrict them.

About 70 percent of the people who take out an option adjustable-rate mortgage, which lets the buyer avoid paying even the full interest on the loan [Ed: !!!!], end up paying the lowest permissible amount each month, according to the Federal Deposit Insurance Corp., which regulates banks. The amount unpaid is added to the mortgage balance, so borrowers end up owing more than when they started. Having no equity in a home increases the risk of foreclosure, especially when housing values fall and houses are hard to sell.

It's like the credit card writ large.

 [ 08.23.06 ]



As the only human left in a 4-5 bedroom monstrosity, this sounds like an ideal way to substantially increase my pension benefits while the housing market is so sluggish. Otherwise, only the cats inside and the raccoons outside offer much incentive to stay.

Peace, Doc

The same thing happened in the UK in the '80s - they were referred to at the time as 'endowment mortgages' and a lot of people were advised by the banks to take them. Then inflation slowed down, and a lot of people were stuck in a negative equity trap.. So many there are now entire law firms, a small industry, handing the complaints of people mis-sold these products. It's a massive mess for the lenders, they're having to pay out a fortune.



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