It's more than that.  Not only did people get loans they could not afford, they didn't understand, or try to understand, the workings of an Adjustable Rate Mortgage.  They took out a subprime ARM at say 4%, but when the initial rate period ended, that interest may have gone up to 6% or even higher.  Depending on the amount of money borrowed, that could increase a monthly payment hundreds of dollars.  So, if the borrowers were already stretched making the initial payments, they were sunk when it came time for the interest rate to go up.

The really sad part is that all of this was spelled out in the loan contracts.  The lenders are partly at fault for lowering the standards for obtaining a loan, but the borrowers are more at fault for not understanding the contract.

That's only part of the problem.  The other part is that the economy started slowing down and people's incomes stagnated, or declined.  Some found themselves out of work.  When that happens what was an affordable payment becomes a problem.  I know many people that bought homes in my area when prices were high out of the fear that if they continued to rise, they'd never be able to afford a home.  Home values were escalating by $200,000 or more in one year.  ARMs were only a small part of the problem.  Interest only loans were the most prevalent because they offered the lowest payment on $600,000 properties (the average for a single family home in my neighborhood at one point).

I'm in the position where you were Ed.  My 2 year ARM started at 3.75%.  2 years ago it went up to 4.75%, and last month it didn't change at all.  So, for another 2 years I'm at the same mortage payment (actually it went up $4 per month because property taxes went way up).  Even with excellent credit, I couldn't get a fixed loan at this rate. 

Let me guess, your initial loan was thru your Credit Union?

Absolutely.  Totally agree.  I even changed the font of your "mutter grumble"!

The really sad part is that all of this was spelled out in the loan contracts.  The lenders are partly at fault for lowering the standards for obtaining a loan, but the borrowers are more at fault for not understanding the contract.

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Contracts from mortgage companies are written up by people with financial and/or legal training. You cannot possibly expect borrowers to go in and and understand everything in a loan contract the same way that the lender does. It should be a lenders responsibility to make damn sure everything is clear before they allow anyone to sign. Most of these people couldn't afford a lawyer to go over the contract with them.

Zogby Tracking has Obama winning NC by 14 points and winning IN by 2:  http://www.realclearpolitics.com/epolls/2008/latestpolls/ind ex.html

They've gotten remarkably more accurate as the primary has worn on.  They picked PA dead on.

Wiliam McCormick wrote: Contracts from mortgage companies are written up by people with financial and/or legal training. You cannot possibly expect borrowers to go in and and understand everything in a loan contract the same way that the lender does. It should be a lenders responsibility to make damn sure everything is clear before they allow anyone to sign. Most of these people couldn't afford a lawyer to go over the contract with them.

Any time you sign a contract you are engaging in a legal agreement -- it is up to you to make sure you understand the terms of that agreement before you sign (with "you" meaning the individual, not YOU specifically, William). 

When the shiny, happy, cute, well-dressed loan officer smiles and asks "do you have any questions," it's up to YOU to ask if something is unclear.  As a buyer, if there is something in the mortgage contract that you don't understand, then that is YOUR problem, and you have two choices:  Wait until the issue is fully explained to you by the lending institution and make sure that you are comfortable with what the meaning is, or back off and decide that this is an agreement that you do NOT want to engage in.

It's that simple.

Now, in practice, it IS tough to read EVERY word in all the mortgage contracts that are carted-out for you to sign.  In that respect, our family was pretty lucky -- my wife is an editor, she's a fast reader, she asks LOTS of questions, and she expects solid answers.  It probably took us a lot longer than it does for most people to get through the mortgage signing process, but we were absolutely sure that there were NO surprises waiting for us after signing.

Of course, being the practical guy I am, I always follow this one simple rule before signing ANY contract (especially mortgage paperwork):  Look at every page and make sure you don't see the word "soul"; if you do, read that section carefully to ensure that it does not indicate anything about selling one's soul, or anything about a contract with Satan.

So far, that simple practice has kept me from getting into any real trouble!

;-)

Turning away from the Mortgage Crisis and back to the DNC's Crisis of Inifinite Primaries . . . here's a David Brooks editorial that describes the different political styles of Clinton and Obama:

http://www.nytimes.com/2008/05/06/opinion/06brooks.html?ex=1 367812800&en=4ccc039b2410208b&ei=5124&partner=pe rmalink&exprod=permalink

Zogby Tracking has Obama winning NC by 14 points and winning IN by 2: 

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I hope you didn't bet on those numbers. Zogby also had Obama winning California by 13 and a tie in Ohio.

I hope you didn't bet on those numbers. Zogby also had Obama winning California by 13 and a tie in Ohio.

Shit! There goes my mortgage . . . .