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March 15, 2006

Housing Threedux

What I am hearing is that in 2005, almost half of the people who bought a house in this country put 0% down (1). There's only one way to get a house with 0% down I'm aware of, that's by taking out a very bad loan - an "Interest Only" or the slightly less bad but still dangerous "Variable Rate" loan. Don't even talk to me about those "negative amortization" loans, where the interest actually gets added to the principal for the first 5 years! So you have one of these loans, and now let's say in the next 5 years your house doesn't appreciate in value, or worse it loses some value. At the same time, interest rates are rising and so's your monthly payment. Well you'd like to sell the place and get out of this situation - after all, now your home is worth less than your outstanding loan balance, and its only getting worse. But guess what, the market is already starting to flood with bank foreclosures that are selling for a fraction of their original retail value. Why would anyone pay what you paid for your house, when they can spend half as much for your neighbor's house instead? And you're saying perhaps half the homebuyers in this country are in the same precarious situation right now? Who's responsible for this impending catastrophe!? I have some names for ya; Bxxx Exxxxxx, CEO, Quicken Loans Dxxxxx H. Mxxx, President and CEO, Fannie Mae I'm sure these guys are pleasant in person, and swing a mean golf club. But "irresponsible lending," in the name of helping good American people get ahead in life, is something I'd like to hear them apologize for. I'm not holding my breath.