WSJ: Oh Wow, This Could Be A Disaster!
This WS Journal report must mean that the halls of power are getting worried about what they have created. "In California, interest-only loans accounted for 61 percent of the mortgages taken out to buy homes in the first two months of this year, up from 47.1 percent in 2004 and less than 2 percent in 2002."
"Mortgage strategists at UBS AG called the shift to ARMs and nontraditional mortgage products such as interest-only loans 'symptomatic of..the end of the housing cycle."
"Partly because of these products, mortgage originations are expected to total nearly $2.5 trillion this year, according to the MBA, down slightly from $2.6 trillion in 2004."
There you have it, the MBA admitting that mortgages are down. And what would the numbers be if these 'products' weren't around? The bubble would have already burst. Consider this; if the interest only loans were 17% of 2004 totals, that's $442 billion! The percentage is certainly higher for 2005.
"If home prices fall as rates rise, some borrowers with interest-only loans could wind up owing more than the value of their home. Even if the growth in home prices simply flattens or slows, some borrowers could be squeezed by rising mortgage payments." A little late, WSJ, but welcome none-the-less.