[lbo-talk] frontiers of financial innovation

Doug Henwood dhenwood at panix.com
Tue Jan 18 16:21:31 PST 2005


Marta Russell wrote:


>>I love this phrase I just read in a letter to Business Week:
>>"negative amortization variable-interest mortages with low teaser
>>rates." I'm guessing that this means that in the early stages, your
>>monthly payment doesn't even cover the interest, so the difference
>>gets tacked on to the principal - and, should market interest rates
>>rise, so will your mortgage payment. What are people thinking when
>>they sign up for these things?
>>___________________________________
>
>With all that gobbledygook they are probably making a less informed
>guess than you are.
>Marta

You know, I bet in most cases the info is disclosed. Maybe I'm wrong. But I suspect people are more or less knowing when they sign up for this nonsense - they're just deluded. Same as all those idiots who bought Pets.com (or, I'm tempted to say, Argentine bonds, even if it's Italian retirees who are taking a major hit).

Doug



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