Reply #428: Oh, I think these nothing-down, interest only loans should be [View All]

[Flatulo]

illegal. On the other hand, I find it hard to believe that people could be so uneducated as sign up for such a lousy deal. I do know people who did just that, paying interest-only for 10 years, and they were told 'If you can't make the payment, don't worry, you can just flip the house and put $50K in your pocket.' They knew damn well what they were signing, and they naively believed the sales BS.

I personally would have run away as fast as I could from such a deal, but I'm older and I remember several real-estate crashes in my liftime. Plus, I am particularly risk-averse and have managed to avoid debt for most of my life, in general by going without stuff that I couldn't afford. I live in a shitty little house and drive an 11 year old car.

What I find troubling is the increasing number of people who walk away from their mortgages just because their investment is under water. They can still pay, but they just prefer not to. Do you think this hurts the banks, or do you think they just pass the loss onto their other customers, ie; your neighbors in the forms of bailouts to the banks?