“Those who do not learn from history are doomed to repeat it.”
We’ve all heard this proverb before. If you’re in the market for home, I cannot urge you strongly enough to take it to heart.
CNBC.com is reporting that, as mortgage interest rates have started to creep up, there has been a rush to adjustable rate mortgages, or ARMs. These ARMs typically offer lower teaser interest rates that increase after a few years. The CNBC article even mentions a return to interest-only loans.
As a foreclosure defense attorney, I am shocked and horrified at this article. Tricked-up loans, such as ARMs and interest-only (and the worst–reverse amortizing) were a major reason our country got into the mortgage mess of the mid-2000s. Banks were certainly not blameless, as they were sloppy with paperwork and were more than happy to peddle loans that they knew borrowers couldn’t afford after all the up-front incentives ran out. However, homeowners bought into the hype and bought houses with non-conventional loans assuming that everything would be fine in the long run.
Well, we saw that everything wasn’t fine in the long run.
It is my sincere hope that this CNBC.com article on the recent increase in adjustable rate mortgages is not indicative of a long-term trend. I hope lenders and would-be homeowners have a good memory of the absolute quagmire that we were in and do not put short-term profits and gratification ahead of long-term financial health. If banks and home buyers cannot do this, I fully expect to have a dramatic increase in my foreclosure defense business in a few years.