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Technology Stocks : InfoSpace (INSP): Where GNET went! -- Ignore unavailable to you. Want to Upgrade?

To: tahoe_bound who wrote (27277)	6/19/2002 2:05:02 AM
From: tahoe_bound	Respond to of 28311

Theory vs. Reality in Mortgage Lending As the economy has struggled over the past year, the media has repeatedly said that the real estate market remains prosperous. Interest rates fell to remarkably low levels and stayed there; the percentage of home owning families rose to record levels. In theory, low interest rates produce more affordable fixed-rate mortgage payments, a formula for long-term stability. But let's look at the reality. The data suggests that, if anything, low interest rates have invoked the law of unintended consequences: new home owners are taking on far more debt than they can afford, via the riskiest mortgage loans on the market. A few facts: First-time homebuyers made an average down payment of 3% in 1999, down from 10% a decade earlier. As a percentage of disposable personal income, mortgage payments have reached the highest level since the Federal Reserve began following the data -- a 45% increase since 1980. The percentage of people choosing adjustable-rate mortgages -- which can increase the size of mortgage payments as interest rates rise -- has virtually doubled in the past year, to 30%. It gets scarier. A new type of home loan is apparently becoming popular, known as the "interest only" mortgage. The borrower gets a reduced interest rate, but none of the monthly payments go to principle for as long as 15 years. A perky quote from one lender says that borrowers can "take the money they would have used to pay down principle and pay down higher interest consumer debt, invest, or pay for remodeling." In other words, trade debt for debt or better yet -- "invest" what would become home equity in a bearish stock market.