SurfNturf- I agree with you. I was buying a short sale from a homeowner that bought a brand new home and a year later bought a condo on the beach with two adjustable rate mortgages.
The beach property which I was interested in purchasing had 100% financing on this property with two separate lenders. He had taken out a subprime loan to purchase this property only a year after buying a brand new home in another state.
The value of the property plummeted from $450,000 to just $200,000, and he was not able to sell at the $200,000 price because there were so many foreclosures by that point, that it pulled the market price lower.
Also, the complication of settling with two separate banks was difficult because in this case the first mortgage gets paid off with the proceeds of the sale but there are no funds available for the second mortgage.
This lender wanted an additional $70,000 which is why the property eventually went into foreclosure. The important thing to remember is only buy what you can afford, and be very careful with second mortgages. They should not be used as a down payment on a home as it was in this case.
This is a classic example of how the US subprime mortgage crisis revealed itself.