House as an ATM Machine?

12MoDef -- hip hop for a U.S. housing bubble on the edge
HARRY KOZA
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"Anyway, a company in California (where else?) called Mortgage Payment Deferral Inc. has come up with such a fiendishly clever idea for a new kind of mortgage that they've actually applied to patent it. It's the "no payment for 12 months" mortgage. Forget those picayune no-money-down mortgages or those cheesy negative amortizers -- they're, like, so last year. This one, which the company calls the "12MoDef" mortgage, (as in 12 months deferred) is, as MPD's president, Jeremiah Miller says, "a truly wonderful product.""

"It's elegant in its simplicity. Instead of U.S. consumers refinancing their homes and withdrawing the accumulated equity to spend on buying stuff made in China, their bank can withdraw the equity and keep it. Obviously, this is much more efficient. Freed -- at least for a year -- from the burden of making monthly mortgage payments, the consumer can then direct himself to paying down the outstanding balances on his 17 maxed-out credit cards. "

"Canadians are fortunately, by and large, still wedded to that increasingly old-fashioned notion of buying a house to live in and actually paying off their mortgages some day. That sounds rather quaint by modern California standards."

"Meanwhile, in New York and Washington, D.C., 2,500 condo projects have been cancelled, and builders are turning existing unsold buildings into rental units, according a New York Times story last week about the travails of condo speculators. One example: You need to sell it for $890,000 (U.S.) to break even, or accept an offer between $800,000 and $840,000, or rent it out for $4,000 a month (though it costs $6,800 a month to carry). Some choice: a quick fat loss or death by a thousand monthly payments." Full Article.