No one forces you to sign things unless they have a gun. You can however be forced by the sheer synergistic power of your own stupidity, laziness, and ignorance though. This is the case with many homebuyers and folks who take out debt consolidation mortgages.

     CNN just did a fairly long piece on the folks who have signed up for loans that they haven't got a prayer of paying off ever. Of course CNN's AnchorDweeb fawned over the morons who stupidly signed a contract at signing that they knew had been changed! Of course it wasn't these tools fault... Nanny Government should have somehow stepped in and kept them from beggaring themselves at the altar of their own idiocy.

     AnchorDweeb kept this up non-stop until the panel of commentators with her stepped in and roundly condemned the couple for doing something so patently retarded. Anchordweeb looked a bit stunned and hurt that they could possibly be holding people accountable for their own actions but caved to the pressure and reluctantly acquiesced that "Ok, maybe the people had some shame of the blame but shouldn't the Government do something?!?"

     Here is the thing... the latest kerfuffle over "sub-prime" lending has confused many people. They way that home loans used to work was that the bank or mortgage company would issue a loan to people they considered to be good credit risks. This meant that they only gave loans to people they were fairly certain would actually be able to pay them back. The bank would then hold the loan and make their profit from the huge interest on a 30 year loan.

     All this changed with the advent of real estate funds traded like stocks or bonds. The way this works is that a third party buys a bunch of mortgages from the original loan issuers. They then sell bonds to investors using the payments from the loans to pay the returns on the bonds. This was further refined by gathering these loans into groups by risk called tranches. The loans from high credit risk borrowers were grouped with other high-risk loans and the loans from rock-solid risks with other solid loans. Then an investor would buy a bond from one of the tranches receiving a much higher rate of return from buying a piece of a high-risk tranche (because this tranche was only paid off after the lower risk ones were paid off) while safer investors bought low return bonds from the safe tranches. Complicated I know but stay with me....

     Since original lenders no longer held loans for the length of the mortgage they were far more motivated to give loans to people who were much higher credit risks than ever before. These high risk loans were easily sold to companies putting together bundles of loans for high-risk tranches. This is a pretty transparent vicious cycle.

     Add to the tranche phenomenon the discovery that people aren't inclined to look at anything before signing it and you get specialty mortgages. These started simply as Adjustable Rate Mortgages or ARM's where the interest rate typically starts at an artificially low teaser rate for a year or two and then adjusts massively upwards based off the prime rate. ARM's are bad enough but they have nothing on "interest only" loans wherein you pay nothing but interest for the first 2/3 or so of the loan. This means that after 20 years of payments on a 30 loan you actually own nothing. Lenders love this type of loan a lot because they can allow lower interest rates since they still own the entire home for the next 20 years. Most borrowers will end up "selling" the home prior to that date which means they effectively rented the property from the mortgage holder but the mortgage holder wasn't responsible for anything as a landlord. Genius.

     Tying up the stupidity hat-trick are loan consolidation mortgages. Companies will bend over backwards to convince dupes that rolling non-collateralized debt into a loan anchored by their homes is a good idea. I don't care how much credit card debt you have... no one will ever be able to repo your home or property because of it. Look it up. Home loans though are a different matter. Rolling debt that had no real hold over into a loan that can leave you homeless is a bad idea at any interest rate. 

     The real tragedy here is that none of these loans are ever "forced" on anyone. Each and everyone is brought into effect only when someone willingly signs a contract spelling it all out in black and white. Of course most people hate reading anything and simply sign whatever is put in front of them. it is only after they start having problems paying the bills for the loan they moronically signed for that they are gifted with bursts of energy. Then they have no problem speding 20 hours a weeks hawking their problem to sympathetic journalists and professional victimists who will sympathize with their "plight". all of this could have been averted by taking an hour or two to either read the mortgage contract yourself or spedning a few hundred dollars to have a lawyer read it for you. After all, what is a few hundred bucks when you are about to go into debt for hundreds of thousands?

     Sign one of these and you have no one to blame but yourself. There are plenty of free resources out there that will explain home loans and amoritization schedules to you on the Web. Go use some. 

P.S. Do yourself a favor and also do the free investing lessons over at Morningstar before you start day-trading. Or just be a retard and start losing money.