ARMS are NOT bad loans or the problem. Interest only loans are not bad loans or the problem. I was a mortgage consultant until this past year when I decided it was time for a career change. There is nothing wrong with any of those loans. In fact, if someone is responsible those loans will benefit you tremendously. The problem are the lenders giving any type of loans, be it fixed, adjustable, interest only, a combo of the two, to individuals who have no business buying a home. It's the guidelines that are the problems. Every program has guidelines, credit restrictions, income restrictions, job restrcitions, history resctrictions etc. etc. However the sub prime market has been steadily increasing since before 95 really and has now for the past few years really started to burst. The companies are creating guideline loop holes for doc waivers, and income hikes, and credit explanations and write offs, and the list could go on. It's irresponsible people that feel they are entitled to own a home so they quailify with a backend ratio of 50% on an FHA loan where the government will give you the 3% you don't have to put down and hike the sales price. People should not be able to buy a house unless they are 'A' paper credit and have the 5-10% to put down from verifiable sources. Just like the analogy with dogs goes... "There are no bad dogs, just bad owners!" "There are no bad loans, just bad owners!"
RESPONSIBILITY from both the lender and the mortgagee is the problem.
