Monday, September 18, 2006

 

Toxic Mortgages

Below are two articles highlighting the risks involved in new types of mortgages which allow for a lot of flexibility in financing home purchases. Many people are complaining about mortgages which reset to a higher rate but I am skeptical. Most of those who took on the risk were simply foolish rather than fooled. Still, there is a principle guiding those involved in investing people's money called suitability. Simply put- widows and orphans don't own oil wells. Do mortgage brokers owe mortgagees similar protection against their natures. Apparently not but I would not be surprised to see this in the future and that would not be a bad thing, in my mind. Of course that means as the housing market craters there will be fewer options for financing housing but that is the nature of our credit regulating authorities: taking the punchbowl away the night after the party.

MSN Article.

Business week.

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