Isn't it ironic that

[Colonel_here]

"Which of these products do you think makes sense?

1. The "balloon mortgage," in which the borrower pays only interest for 10 years before a big lump-sum payment is due.
2. The "liar loan," in which the borrower is asked merely to state his annual income, without presenting any documentation.
3. The "option ARM" loan, in which the borrower can pay less than the agreed-upon interest and principal payment, simply by adding to the outstanding balance of the loan.
4. The "piggyback loan," in which a combination of a first and second mortgage eliminates the need for any down payment.
5. The "teaser loan," which qualifies a borrower for a loan based on an artificially low initial interest rate, even though he or she doesn't have sufficient income to make the monthly payments when the interest rate is reset in two years.
6. The "stretch loan," in which the borrower has to commit more than 50 percent of gross income to make the monthly payments.
7. All of the above.

If you answered (7), congratulations! Not only do you qualify for a job as a mortgage banker, but you may also have a future as a Wall Street investment banker and a bank regulator."

Alright lets see how this works.
Number one mortgage is based on the following idea. That average family moves out of their house after 5 years and doesn't really keep the house over long term, so for this purpose this mortgage would make sense as the last grand payment would come from the sale of the home. Interest only payments would decrease the cost of the mortgage of the mortgage allowing more families to buy the home.
This product would also be great for speculators.

Number 2 is based on the idea that bad loans could be written off and successfully managed of by the risk management department. In the end of it all the bank still gets the house that they can liquidate.

Number 3 same idea as before new families with lower incomes could buy the home sooner and since their income expected to go up over time they will increase their mortgage payments. More dangerous loan for the banks because it exposes it to greater risk due to the value of loan could exceed the value of the asset. However the banks often have the options to pull the loan back.

Number 4 has been a common practice for a long time and just analogical to having multiple leans on the house.

Number 5 same idea as before, the persons income will grow and they would be able to make the new payments.

Number 6 the loan is based on the idea that the person can make the payments (hey they signed it) but the bank will get the house to liquidate in the worst case.

Final person at fault is CONSUMER for being and IDIOT and signing up for this stuff without consulting financial adviser or thinking things thought. It is all great to blame the big companies but they did not make anybody sing those mortgage papers people chose to do it themselves. If they would have thought more about it or gave another thought to it they would not be in the mess. The companies are at fault with improper risk management of these loans.