"Are We Setting Them Up For Failure?"
The Mortgage Bankers Conference sounds like crack dealers worrying about their customers. "Thomas Lund, at Fannie Mae,'We don't believe the home prices we've seen, in terms of growth, are sustainable.'"
"'One of the things we don't feel good about right now as we look into this marketplace is more home buyers being put into programs that have more risk,' Lund said, noting that some short-term hybrid ARMs come with prepayment penalties that stay in effect longer than the fixed-rate portion of the loan."
"Those are products for more sophisticated borrowers," Lund said.
"For less sophisticated home buyers, 'does it make sense for borrowers to take on risk they may not be aware of? Are we setting them up for failure?'"
"'Three years ago, interest-only mortgages comprised about 2% of the market, today it's up to 15%,' said William Batz, of Federal Home Loan Bank of Pittsburgh."