Video glosses over an important aspect of balloon mortgages. No one ever really expected you to pay the full balloon. The expectation was that you’ll pay some p

Video glosses over an important aspect of balloon mortgages. No one ever really expected you to pay the full balloon. The expectation was that you’ll pay some portion and roll the rest into a new balloon. The problem during the Great Depression wasn’t that the people couldn’t make their balloon payments (they never could) it was that the banks had no money to lend, and they couldn’t roll the balloons. (An interesting aside, is that during the run up to the crisis, banks reinvented balloons in the form of the teaser adjustable rate. These had a low fixed rate for 2,3 or 5 years, and then would turn into 28,27 or 25 year adjustable rate loans, with they rate much, much higher. The thing is, no one was ever supposed to pay that rate. When the teaser period ran out, the borrower was expected to refi. And of course we know what happened next....)