My last post was on the resident evil payday loan but it seems my focus should have been a little broader after reading Boing Boing's post on Exotic debt-trap mortgages.

This post was in relation to ARM's (Adjustable Rate Mortgages) that allow mortgagees to select a repayment scheme that suits them. The problem occurs when customers opt for the minimum repayment scheme that pays 0% of the principal and less than 100% of the interest component. The unpaid interest is then added on to the mortgage and compounds increasingly over time.

Do the math and you'll soon figure that these become reverse mortgages and rely solely on a booming property market to be of any benefit (to the home-owner, that is!). Banks will undoubtedly make a killing but if property prices bust and present negative returns in an economy where interest rates increase one would assume that this could also be the screw on banks as well.

Is this not the worst case of banks going berserk in their lending frenzy? In a world where debt continues to spiral can there be any good that can come from these options? And, why are authorities allowing this practice to continue?