Surely this time is different, say unwary home buyers now. adjustable rate mortgages were 16% of the total for the last week in June, matching that of 2007, right before Lehman collapsed. Adding to the festivities, second mortgages are now at 2005 levels.
Yes, the banksters are happy to sell these bear trap mortgages, but really, with potential homeowners like one profiled in Bloomberg who says, sure it’s risky but the money savings will make up for it, and maybe he’ll refi a few years anyway, well, this is just lambs to the slaughter.
Another assumption of ARM applicants is that their income will be higher by the end of the loan’s fixed period so they can handle higher payments if they can’t sell, said Henry Savage, president of PMC Mortgage Corp.
“When you start making those calculations, you’re playing golf in the dark,” said Savage.