The Coming Collapse in Housing
I am convinced that the housing bubble is gigantic and will burst before long with massive implications here and abroad. In fact, it’s the key to the global economic outlook. Setting the Scene House prices in recent years have leaped well beyond their normal relationships to the CPI.
We’re referring here to interest-only Adjustable Rate Mortgages as well as option ARMs that allow borrowers to make even lower monthly payments that result in a rising mortgage principle, or “negative amortization.” Then there are unrealistically high property appraisals to justify oversized loans and the lack of full documentation that allows borrowers to overstate their ability to make mortgage payments. Lenders also accommodate financially-weak borrowers with high loan-to-value ratio and piggyback loans, which in effect finance more than 100% of the houses’ prices.
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