A Loan That'll Get Ugly Fast

Great LA Times article on "pay option" loans and their role in the housing bubble...

EVERY day, Will Hertzberg owns a little less of his three-bedroom house in Corona.Like hundreds of thousands of other homeowners around the state, Hertzberg has a mortgage that lets him choose how much he pays each month. Like many of them, he always chooses to pay as little as possible.For the moment, this allows the 56-year-old Hertzberg to continue living in his tract home despite being only marginally employed. But his debt is swelling, and his mortgage company controls his fate.

"I am rather screwed," he said...

..."I'm waiting for a 100-year loan," he said. "My heirs can worry about paying it off."

Also, Mish's Global Economic Trend Analysis has a related post today, an interview with economist Paul Kasriel on the potential for deflation due to the collapse of asset prices.

Here's a scary chart.