The LA Times reports from California. "Every day, Will Hertzberg owns a little less of his three-bedroom house in Corona. Like hundreds of thousands of other homeowners around the state, Hertzberg has a mortgage that lets him choose how much he pays each month. Like many of them, he always chooses to pay as little as possible."

"His debt is swelling, and his mortgage company controls his fate. 'I am rather screwed,' he said."

"Hertzberg could sell now, but his lender would charge him an $11,034 prepayment penalty, money he doesn't have. Yet if he stays, the housing market may tank, vaporizing what little equity he has left. 'I made choices, and they happened to be the wrong choices,' said Hertzberg."

"One of his options is to pay $2,513 a month. That would cover the principal and interest as if it were a traditional 30-year loan. A second possibility is to pay $2,279, which would cover only the interest. But each month he always takes the cheapest option: paying $1,106 and promising to make up the shortfall later."

"In 2003, only about 8 of every 1,000 people buying a home or refinancing a mortgage in California got a pay option loan, according to First American LoanPerformance. Last year, 1 in 5 loan applicants got one."

"In the first eight months of 2006, even as the real estate market began to weaken amid fears of a downturn, the appeal increased again. Nearly 1 in 3 California loan applicants are now choosing them. The state boasts about 580,000 active pay option mortgages, about half the U.S. total."

"Hertzberg bought his house 11 years ago for $129,995. With fresh paint and a few repairs, Hertzberg could probably sell his place for $275,000 more than he paid. He would see little of that, however, because he's already seen so much. Over the years he has taken out $190,000 in cash through refinancings."

"Hertzberg's home equity paid off his credit cards, financed trips around the world, bought a $32,000 Toyota Avalon and enabled some lousy investments. He bought dot-com stocks and lost money. To recoup those losses, he bought commodities, and lost money faster."

"'Free money always has the unfortunate effect of making people go overboard,' said Hertzberg, whose living room is strewn with financial publications including American Cash Flow Journal and Donald Trump's 'How to Get Rich.' 'You'd be surprised how fast $190,000 can go.'"

"Last fall, he went to a mortgage broker and refinanced again to make his payments easier to bear. He thought he would have a five-year window before the principal started coming due."

"But the day of reckoning is arriving early. By paying the minimum, Hertzberg has increased the size of his loan in a little over a year from $320,000 to $332,616. His lender, Countrywide Financial Corp., recently sent him a letter warning that when his loan hits 115% of its original size he'll run out of credit with the company."

"That will happen in about two years if he continues to take the smallest payment option. Then his minimum payment will automatically go up 150%, to $2,848 a month. 'If I could afford that,' he said, 'I wouldn't have needed this loan in the first place.'"

"It's a sorry situation, and Hertzberg is generous in assigning responsibility for it. To start with, he blames his mortgage broker, who didn't advise him how risky these loans were."

"Few brokers do, U.S. Comptroller of the Currency John Dugan says. In an October speech, Dugan said the marketing materials for payment option loans often 'emphasized the low initial payments but glossed over the likelihood of much higher payments later.'"

"Although Dugan and other regulators are taking steps to address both problems, Hertzberg said they never should have allowed these loans to become so prevalent in the first place. 'The government wanted to keep the housing party going,' he said."

"Yet who didn't want that? Hertzberg admits he was a willing co-conspirator. 'I got spoiled and complacent and was not prepared when the bottom fell out,' he said."

"Several times a week, he gets a refinancing offer in the mail. Hertzberg always looks at these fliers, hopeful in spite of himself. 'I'm waiting for a 100-year loan,' he said. 'My heirs can worry about paying it off.'"