I’ve been following the subprime mortgage crisis fairly closely and think I know the cause … Americans just can’t do math.
Half of the ARM borrowers were qualified for regular (and less expensive) mortgage terms – but didn’t ask for the better terms.
Many new mortgage-holders used their house as a private ATM machine: as soon as the price inflated, they signed for Home Equity Lines of Credit (HELOCs) and went on $50,000 shopping sprees.
Readily-available mortgage insurance ensured that lenders didn’t care who was on the other end of the pen. Now that jumbo loan insurance is limited to $417,000, lending standards have tightened dramatically.
MBA Data Confirms Popularity of ARMs and Interest-Only Products Despite Overall Mortgage Origination Decline
money.cnn.com: Help! Our kids are driving us broke
cnn.com: Wealthy may be next in line in home crisis
