When are people going to learn that there is no free lunch?

You know, for a country full of people who continue to decry the ever-shrinking pool of welfare recipients for wanting "something for nothing", this country has its share of people who still want that free lunch for themselves.

What on earth were these people thinking?

Gordon Burger is among the first wave of option ARM casualties. The 42-year-old police officer from a suburb of Sacramento, Calif., is stuck in a new mortgage that's making him poorer by the month. Burger, a solid earner with clean credit, has bought and sold several houses in the past. In February he got a flyer from a broker advertising an interest rate of 2.2%. It was an unbeatable opportunity, he thought. If he refinanced the mortgage on his $500,000 home into an option ARM, he could save $14,000 in interest payments over three years. Burger quickly pulled the trigger, switching out of his 5.1% fixed-rate loan. "The payment schedule looked like what we talked about, so I just started signing away," says Burger. He didn't read the fine print.

After two months Burger noticed that the minimum payment of $1,697 was actually adding $1,000 to his balance every month. "I'm not making any ground on this house; it's a loss every month," he says. He says he was told by his lender, Minneapolis-based Homecoming Financial, a unit of Residential Capital, the nation's fifth-largest mortgage shop, that he'd have to pay more than $10,000 in prepayment penalties to refinance out of the loan. If he's unhappy, he should take it up with his broker, the bank said. "They know they're selling crap, and they're doing it in a way that's very deceiving," he says. "Unfortunately, I got sucked into it."

There's no way to camouflage what Harold, a former computer technician who asked BusinessWeek not to publish his last name, is about to face. He's disabled and has one source of income: the $1,600 per month he receives in Social Security disability payments. In September, 2005, Harold refinanced out of a fixed-rate mortgage and into an option ARM for his $150,000 home in Chicago. The minimum monthly payment for the first year is $899, which he can afford. The interest-only payment is $1,329, which he can't. The fully amortized payment is $1,454, which his lender, Washington Mutual (WM ), gets to count on its books.

Jennifer and Eric Hinz of Somerset, Wis., are feeling the squeeze. They refinanced out of a 5.25% fixed-rate, 30-year loan in June, 2005, and into an option ARM with a 1% teaser rate from Indymac Bank. The $1,483 payment for their original mortgage dropped to as low as $747 with the new option ARM. They say they had no idea when they signed up, however, that the low payment adds $600 in deferred interest to their balance every month. Worse, they thought the 1% would last three years, but they're already paying 7.68%. "What reasonable human being would ever knowingly give up a 5.25% fixed-rate for what we're getting now?" says Eric, 36, who works in commercial construction. Refinancing is out because they can't afford the $15,000 or so in fees. "I'm paying more, and the interest is just going up and up and up," says Jennifer, 34, a stay-at-home mom. "I feel like we got totally screwed."

What kind of moron refinances out of a fixed-rate loan of around five percent to take a low teaser rate offered by some company that bought their name off a mailing list?

I get these all the time -- letters from Joe's Mortgage offering a 1.99% rate. "Reduce your mortgage payment!" they scream. With our third refinancing since buying our house in 1996, we lowered our rate from the 8.5% fixed rate 30-year mortgage we started out with to a 15-year fixed rate 4.75% mortgage in 2004.

Some might say it's easy for people like me, sitting in houses we bought at the bottom of the market, to talk. But we lived through the housing boom of the 1980's, living in rental apartments because prices were just too high for what we could afford and we weren't willing to be "house poor" and take that risk. So we waited till we had a down payment (though we still paid PMI till appreciation brought our equity up), and we kept an eye on mortgage rates, refinancing to other FIXED RATE instruments when it was appropriate.

Don't these people ever wonder why that 1.99% rate exists? Don't they realize it's to suck them in? Haven't they learned from credit card teaser rates what happens? You rack up a ton of debt at the teaser rate, then have to pay off the balance at the higher post-teaser rate. Of course, these are probably the same people who just transfer their balances from one teaser rate to another, never paying off their debts.

I'm not defending the mortgage industry. Predatory lending practices are a very real problem. But ultimately, the law of the marketplace is still caveat emptor. Mr. Brilliant and I are sitting where we are because we did our homework. We resisted the siren song of overpriced houses in the 1980's. We bought when the time was right for us, when we could afford it. We learned what drives mortgage rates, paid our bills on time, so that in 2004, our existing mortgage company was willing to refinance us down a point simply by writing a $350 check, filling out some paperwork and having it notarized.

If Americans can't afford to own homes today because American jobs offer insufficient pay and insufficient security, then THAT'S the problem to confront. Hiding from financial adversity and declining future prospects by taking out mortgages based on illusion is just plain dumb.