I found these paragraphs in Katherine Stone's NYT op-ed today to be especially ironic, emphasis mine:
"Until recently, most Americans paid for their homes through 30-year self-amortizing mortgages, in which interest and principal are paid at the same time. These work well as long as homeowners have stable, long-term jobs that enable them to regularly make their monthly payments.
But these days such careers are increasingly scarce. Therefore, any effort to recover from the crisis must include more flexible mortgages that take today’s employment landscape, with its frequent job-hopping and episodic unemployment, into account.
It’s not as if the 30-year self-amortizing mortgage has been around forever. In fact, it is a fairly recent invention. Before the 1930s, homes were financed by three- to five-year balloon loans. Homeowners made interest-only payments for the duration of the loan, then typically rolled them over into new loans when they came due.
During the Great Depression, however, many borrowers were unemployed when their loans came due; banks were reluctant to offer new loans, and owners had not accumulated enough money to pay off their loans. The result was a wave of foreclosures."
Sound familiar? "Homeowners made interest-only payments for the duration of the loan then typically rolled them over into new loans then they came due." Deja vu all over again. It didn't work then, and it didn't work this time.