Mortgage Bubble Anyone?

by Alex Stenback on August 4, 2005

Top_1Talk of a housing bubble is so 2004. Next up, from a recent article in The Wall Street Journal:

The Mortgage Bubble: A "perfect storm" scenario where lenders under pressure to sustain earnings, and borrowers under pressure to keep up with spiraling home prices, are (in droves) turning to "Option" ARM’s and other exotic home loans as the answer to their woes. A shotgun marriage, if you will, between desperate buyers and desperate lenders, that could all come to a bad end as rising interest rates hose-down a hot housing market.

Though this is mostly old news, the article has a couple of angles we haven’t seen in mainstream coverage.  Mainly: The horse-choking amount of these loans now being originated (30-50% of all 2005 volume by some estimates,) and what appears to be a bit of book-cooking (this is new) on the part of some mortgage banks, suggest that lenders and borrowers alike may not fully comprehend or worse, are simply ignoring, the risks involved.
· Is a Mortgage Bubble Cause for Concern [wsj.com]

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