As many of you know from first-hand experience, banks (“usurers”) take advantage of customers (“suckers” in the usurers parlance) all the time. This image below is from today’s post by the always suave and debonair Dr. Housing Bubble illustrates just one fine example: how a $460k Pay-Option Arm loan can morph into a $523k loan.
Let’s ignore for a moment whether this should even be legal. Usurers (“banks”) got a quick and profitable sale on their books from larger-than-normal fees they skim off transaction.
Usurers issued a loan that was really a ‘call’ option that might pay off eventually– if the poor homedebtor:
- manages to hang on to his job
- can continue to make payments as they escalate
- house prices continue to go up
Of course, as we know from recent reality-checks, these may turn out to be an impossibility.
Positive equity doessn’t appear to be as likely as it did in 2005-2007, does it?
When a homedebtor realizes s/he is nothing more than a renter who’s own call option has expired worthess, insto-presto, they get ambulatory and downsize… leaving a smoking hole in the usurers balance sheet.
So the usurers got their money from the rest of us in the form of a bailout.
All’s fair, etc.