Scraping the Bottom of the Barrel

Some have argued, and it makes sense to me, that when banks began offering negative amortization loans and 40 year mortgages, that means they essentially ran out of financially solvent customers and had to attract less than solvent customers. To put it more simply, anyone who could afford a house already owned at least one, forcing banks to try to sell mortgages to people that can't afford a house.


"NEW YORK, Aug 22 (Reuters) - Sky-high prices are not preventing cash-strapped consumers from getting the house of their dreams now that lenders are letting them drag out the term of their mortgages to 40 years.

By moving from a fixed-rate 30-year to a 40-year loan, borrowers can stretch out loan payments and qualify for larger mortgages with lower payments.

While that seems to be good news for consumers, financial experts say the benefits are far outweighed by higher interest rates, 10 years of extra mortgage payments and a reduction in home equity."

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