Sunday, August 19, 2007

The Free Lunch Bumps Up Against the Free Market

Was the Mortgage a Mistake?

They Bought the House They Wanted, and Now Everything's Changed

Washington Post Staff Writer Sunday, August 19, 2007; Page F01
Two years ago, my wife and I sat at a long conference table in a mortgage-title office in Bethesda. Sitting next to us: our real estate agent, who drew up our bid on a townhouse in Germantown two days after showing it to us. We didn't get an inspection, and I don't recall going back for a second look. We had to act fast or someone else would get it.
But that wasn't really on our minds two years ago. For us, and I suppose others who signed such deals, the lower payments afforded by an interest-only loan helped us buy a house in an expensive county -- Montgomery -- where we wanted to live and eventually send our children to school. Our payments were significantly lower than what they would have been with a 30-year fixed-rate mortgage, meaning we could buy a nicer, larger home. Also, with the real estate market then booming, we planned to sell the house within five years anyway -- for a big profit, just like the previous owners got from us -- so why pay principal on what was essentially a starter home? ___________________________________________________________________ How can these highly educated professionals actually complain of being victimized? Foolish choices for greedy reasons--:we planned to sell the house within five years anyway -- for a big profit"--smacks of believing in a free lunch. Now the Fed is all wrapped up in saving, not these foolish investors, but the pariah banks and re-packagers of financial instruments. Save their bacon, so they can go unpunished and dream up the next scam. ________________________________
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