"Buyers Have No Idea" : Pulte
This Business Week story reports that the number of interest only loans is far higher than the MBA allows. "Here are some scary statistics: In 2004, fully 50.4% of the mortgage loans issued for purchases of single-family homes in Georgia were to pay interest only. That made the Peach State No. 1 in the nation in its share of interest-only mortgages."
"But a whole bunch of other states were not far behind: California was second, at 47.1%, Colorado third, at 45.5%, Nevada fourth, at 44.7%, and the District of Columbia, fifth at 43.8%."
"The numbers come from LoanPerformance..They're for loans that were packaged for resale, so they don't cover quite the entire market, but they give a pretty good picture of the trend."
"The availability of such loans has probably contributed to the upward spiral in home prices, as shoppers armed with cheap financing try to outbid each other."
"Interest-only mortgages were designed for wealthy families..Trouble is, the sheer numbers indicate that the loans are also being taken out by a much bigger sector of the public."
"But even some parties that benefit from the rage for interest-only mortgages, like homebuilders, are wondering if the trend may have gone too far. 'In most of those cases, buyers have no idea how they're going to pay' the higher payments that will be owed once principal payments begin, says William J. Pulte, founder and chairman of Pulte Homes."