TheBreeze wrote: “The home “buyers” who made out best over the last 8 years were those who didn’t put anything down and got either an Interest-Only mortgage or a Pay Option mortgage. Because mortgages are non-recourse, not putting anything down and paying only the interest (or less) allows the “buyer” to take any appreciation upside while sticking any depreciation downside to the bank (by defaulting). Home buyers who got screwed the worst over the last 8 years were those who made down payments as that down payment has now evaporated with home price depreciation.”
You are correct. It was smart of the no-downpayment buyers to take advantage of cheap call options on home prices being offered by lenders. It was idiotic of the taxpayers and lenders to permit this to happen. Financial losses now are providing an effective incentive for private investors to require 20% or higher downpayments in the future. But govt schemes are still allowing homes to be bought with less than 20% of the buyer’s personal savings at risk. And Barney Frank and Chris Dodd are the prime movers behind this part of the screwed-up system. They won’t let go of this lunacy until Democrats like you call them on it.
