mycatharsis.com

Mark Giemen has a helluva interesting (and scary) story on Slate on why the mortgage crisis may just be getting started.  There are many choice quotes in it, but the point basically boils down to this: as home prices continue to fall, even non sub-prime borrowers are going to find it entirely in their interest to walk away from mortgages that actually cost more than the value of their homes.

I like the point he makes about Treasury Secretary Henry Paulson’s plea to homeowners that they should ‘honor’ their mortgage applications.

The problem with finger-wagging on what you “should” or “ought” to do is that, when it comes to money, you’re usually given the lecture only when it’s in your interest to do the opposite.

Bingo. When the government is pleading with people to do the right thing, the incentive in the existing market to NOT do it must be strong indeed.

I looked at buying a house back in 2005. I remember being pushed hard to look at ARM’s, but I remember having some trepidation about a loan where I didn’t even have to make the interest payments for the first year or two.  Nonetheless, I can’t blame those who did bite on that offer for being greedy.  After all, the lenders sign dozens or hundreds of these loans, while the borrowers may only sign one or two of them in their lifetime.  It seems to me there’s plenty of blame to go around. The lenders took the quick commission, forgoing future stability for the quick buck, and the borrowers jumped at a deal that seemed too good to be true.