"Wes" wrote in message
...
"Ed Huntress" wrote:

It never happened before. If they had asked their banker, or anyone else
who
follows it, what the chances were they'd be upside-down on their mortgage
in
a year or two or three, making it impossible for them to flip their house
and come out ahead if the mortgage became too much for them, the bankers
would have laughed in their faces. The experts "knew" that it couldn't
happen, because it has never happened before.


Ed, anyone that finances a car should know the dangeors of being upside
down.

Sure, on a car. Not on a house. You could have asked any broker or banker, a
year ago, what the chances were you'd get in trouble that way. They'd laugh
you out of the place.

First, they would tell you what I said above. They they'd tell you that once
you'd made two or three years of payments, you'd qualify for a fixed-rate
mortgage before the balloon came due on (what they might call) your "bridge"
loan. Then you could look at all the statistics and see that they're dead
right. Only they weren't, for the first time ever.

Say you buy your new wizbang 4000 and it gets creamed coming off the
lot. Most insurance companies are going to want to pay off on what it is
worth vs what you paid.

That's not the way home insurance works, Wes. Cars are not houses.


A less dramatic example is that you drive your wizbang 4000, 30,000 miles
a
year. Long before you make your 5 years of payments you are seriously
upside down since vehicle values are set by a combination of miles and
condition.

Should we blame the bank for loaning money on a vehicle that decreases in
value quicker than the amortization schedule?

Houses are not cars. If you told a mortgage banker, two years ago, that
there was going to be a nationwide decline in house prices, coupled with a
lending crisis and a credit crunch, he would have told you that you were
nuts.

--
Ed Huntress