Mortgage madness

I was reading this article in the Contra Costa Times "Buyers see new line of mortgages" and it just makes me want to scream. At some point, it seems like the banks would run out of crazy financing options, don't you think? Well, no, I guess not, we Americans are a creative lot, aren't we. *sigh*

But I think I have come up with the a new mortgage product, that should be available at a bank near you in the next 5 years or so. It is the 75 year life option loan! The loan is a interest only loan, where the APR adjusts at whatever intervals the bank offers when you sign up for the loan. Best of all, built into the loan payment is a life insurance policy for the principle of the loan, allowing you to pay off the loan when you die, leaving an inheritance for your spouse and/or offspring that you didn't even have to save for! There would never be that scary time when you'd have to start actually paying into the principle of the loan. Just think how low your monthly payments could be!

Anyways, silliness aside, here's another interesting article (NY Times, reg required) on how the whole adjustable rate mortgage thing is going to come to head soon. In 2007, one trillion in mortgage debt is going to convert from from the original fixed portion of an adjustable loan to a yearly adjustable loan. I wonder if it will just set off another wave of refinancing or if something more will happen. I guess it depends a lot on what the interest rates are like then - if they stay pretty low like they are now, it will probably just set off another huge wave of refinancing but if they move a couple points higher then things could get rather uncomfortable for some people. (Especially if wage growth stays as flat as it has been over the past few years)

Also, check out the map that goes along with this article - it shows the growth of interest only loans in the past 3 years, and where the hotspots are for these loans.