Statewide Bancorp of Rancho Cucamonga (I'm not making this up) began offering a 50-year mortgage loan in the spring of 2006 (see its original press release). Less than two months later, it expanded the program to subprime borrowers.
The idea is to make monthly payments more affordable for borrowers. Lending Tree analyzes the pros and cons of 50-year mortgages here. Your tradeoff for low monthly payments is another two decades of paying interest on the principal.
In today's subprime mortgage mess, the real issue is how any bank will be able to package and sell such loans to investors. Without investor interest, the 50-year mortgage loan will wither away.
Hey, anybody interested in a short-term loan to buy eyeglasses? Put on your specs and see my July 26th entry.
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