Make your payments, lose your house

Want to know all you need to know about the arcana of adjustable rate mortgages? Read the first few paragraphs of this article.

Joe Ripplinger took out a $184,000 mortgage in 2006 and makes his payments every month.

Now he owes $192,000.

The 66-year-old Minneapolis house painter has a payment- option adjustable-rate mortgage. It allows him to write a check for $565 a month even though he owes $1,300. The difference is added to the mortgage, and when his total debt reaches $212,000, or after five years have passed, he said his monthly minimum could jump to about $2,800, which he can't afford.

Details within that story paint a frightening picture. About one million homeowners across the country are in roughly the same sinking boat, accounting for $500 billion in mortgage dollars. The situation is so dire that interest rate cuts from the Fed can no longer help these folks.

Even leaving aside fraud -- which is a huge issue with a lot of these loans, since some homeowners are led to believe they're agreeing to a fixed rate mortgage when they aren't -- this has artificially created high housing costs that are now being "corrected" in a jarring, dislocating way.

These ARMs (which "could be called long-fuse, exploding ARMs,'' says Kathleen Keest, senior policy counsel at the Center for Responsible Lending in Durham, North Carolina) made up almost 10 percent of loans issued in 2006. Of those, one in five required less than 10 percent down and no proof of income.

That's a lot of numbers. Sometimes the stats overwhelm me, and when they do, I go re-read sentences like the first two in that article.

"Joe Ripplinger took out a $184,000 mortgage in 2006 and makes his payments every month. Now he owes $192,000."

That shouldn't happen. The fact that it is happening is bad news for us all.

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