The theme of toxic loans to buy real estate for ridiculously low monthly payments is often referrred to as “a mousetrap“, i.e. picturing the long struggle of those people to save and repay their home.
I don’t think so. As professional bubble trackers point out, many people do default in the very first month of loan life.
The reason is, in many states the date from the first missed payment to the moment when you are forced out from your house is 6 to 10 months. And sometimes it is prohibited to foreclose during winter times. So, the new trend is that some buyers do not expect to make any mortgage payment at all, because it gives them 10 month of free living in a decent house. And better do that after you pushed your loan to 110% of inflated appraisal value using negative amortization.
You can’t beat free, can you? It’s a mousetrap for the bank, not for the owner. Just watch the credit spread on those toxic loans on secondary market to raise:
As you can see the Wall Street is paying $95 for $100 of a loan value. Watch those banks to crack…