[sailingdog]

Unfortunately, not all of the financial institutions offering these kinds of loans were sub-prime institutions IIRC. It was far too lucrative and seductive a profit engine for some of the bigger banks to resist.

The only problem with today is that rates are relatively low and have a good way of room to rise, back in the 1980s, the interest rates were pretty much maxed out IIRC, and had a good deal of room to drop. All of the interest only loan schemes I've heard of are ARMs, not fixed... so they get really screwed over.

Originally Posted by PBzeer

SD - I wouldn't say forced, so much as seduced. These sub-prime lenders exist because people were willing to forego making a responsible decision by the siren call of home ownership and/or "keeping up with the Jones". Builders couldn't build, if there was no one to buy the houses, and people couldn't buy them, unless there was someone to make it possible, when they couldn't actually afford them.

What happened is, rather than let the market set the prices, based on what people could actually afford, they came up with a scheme to give the illusion of affordablility, that kept the prices inflated beyond what the real market would bear. In the end, it really comes down to the people who were willing to "buy into" the whole scheme.

This isn't without precedent either. It happened back in the eighties as well with the advent of condo's.

Currently back in New Bern, NC