"When values stalled instead" - depending on where you live, this might be more accurate written as, "When values crumbled".....

The whole lending game was predicated on quick and easy appreciation. 80/20, 80/10/10, 80/15/5 - that's how they were all done and very few poeple put money down on anything. The PMI was washed away by the loan combos as you mention - which brings up a very good point. A lot of these 80/20s had the same bank issuing both loans. It appears they took the same risks the borrowers did and therefore should pay the same price.

As a borrower, you are a customer of a lender who agrees to pay back a note at a certain rate under certain terms. The lender requires an appraisal to determine value and protect their positions. When the lender is willing to hand out 100% of a purchase price in a market that has already appreciated 30-40% in a short period of time - they are dumb. The borrower is a customer of that institution and I look at it as partnership. "Here, you buy this house for this inflated value - your payments are set for this period of time, and when you can't refi or sell to cover the drastic decline in your value and your inability to make payments, we'll come and take the house and sue you for any deficiency between current value and what you owe."

They took the same risk the buyer's did and made lots of money early - when it crumbled, it has crushed them just as it has a lot of buyers. That's how it should be - the consumers have zero market protection and the government's answer to helping the consumer is what? "No deficiency judgements on prime reisdences...".....what else? Nothing. Rates are still way higher than the hay day from a couple of years ago which contributed to this mess (cheap money made many things affordable, but also came in the form of adjustable loans - which hit maturation and blew folks out of the water - especially those with 5 properties and negative equity). They made the money cheap, gave 100% of value to most anyone, then jacked the rates while the builders over-built everything, saturating the market with inventory.

I don't think 20-30% appreciation annually is real, but I feel the same about depreciation. I bought a custom spec home with a construction loan in 2006. The value was determined to be, by multiple appraisers, $432K. I was buying the home for $332K with loan costs and constuction interest reserve adding up to $27K - $360K total cost at completion of construction, leaving me $72K of equity - nothing down due to the existing equity. No brainer, right? Nothing down, $70K check at the end of the tunnel....strong market, 30,000 person community with asperations of growth to a 100,000 in 3-5 years. Commercial going gangbusters, roads being paved, track house neighborhoods rising out of the dirt....

Anyway, long of the short - upon completion, the current appraised value is $350K - my adjusted cost is $360K as mentioned above. The market crumbled 20% from the start of the project to the end and what did the bank do to help me pay back the debt? Gave me an 8.25 interest only rate on $358K and charged 1% of the purchase price for property tax impound instead of getting the accurate figures from the county. My payment was $3093 and the current rates at the time were 6-6.5% on a 30-year fixed. Because the value had disappeared so badly, my rates jumped. Did the bank want me to pay them back or did they want to soak me before I foreclosed?

So - I quit paying them. They offered me many ways of paying back accrued interest with interest free payment plans on that amount, but they offered me nothing in regards to lowering my rate and actually making my second home payment affordable. Meanwhile the givernment has been saving banks and making concessions for these institutions in grand fashion. The consumer has received nothing.

Again - they took the risk same as the consumer, they pay the price same as the consumer. Only the government has assisted them and not us. It's a racket and although I have no desire to see our financial market weak or shaky, I do hope some of these banks crash and burn as they are now.

The government has no problem shelling out billions for Iraq and aiding other countries, baling out these banks, etc., but the consumers will continue to pay $4+ for a gallon of gas, $4+ for a gallon of milk, and crappy interest rates on depreciating real estate. I don't think McCain or Obama can fix it, but Bush has watch it be ruined and has the nads to say the markets are strong...where George? Which of your dumbass advisors told you this? It's truly sad and the one thing that most Americans had confidence in was the appreciating quality of their real estate. No more and the trickle down is just getting started....