The U.S. Mortgage Crisis- Whose Fault?

Whose Fault Is the U.S. Mortgage Crisis?

  • Adult home owners are responsible for their decisions.

    Votes: 6 37.5%
  • Mortgage brokers are responsible.

    Votes: 1 6.3%
  • Both are responsible with most fault on the mortgage brokers.

    Votes: 6 37.5%
  • Both are responsible with most fault on the home owner.

    Votes: 3 18.8%

  • Total voters
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Minor Axis

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Newsweek: Whose Fault Is This?

Is this an example of adults making bad choices/being greedy? Is it an example of Mortgage Brokers being greedy? Or is it a combination of the two?

I'd say it is a combination of the two, however I qualify that statement by asking how many home buyers are mortgage experts? What happens when you have slick professionals telling you this is the best deal ever and that if interest rates go up, you can simply refinance? Turns out in many/most cases that was not true.

I just watched a story on CNN where a $50,000 a year library was told to not worry about the price of the home, priced at $500k, that she could afford it no problem. Well, again as an adult I'd say you have a responsibility to know how much your house payments are and how much they *could* go up based on the interest rates. However if you are led to believe that you can refinance when the rate goes up, when really you can't, then that is outright fraud. All those troubled mortgages that were started, they were sold and the people who pushed them, made their money. Now the country is in a mess. This is why you need to have rules, regulations, and government over sight.
 
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Fetlock

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I say it’s the mortgage lenders!!!

I’ve read a lot about Bear Stearns, what a joke, string those fuckers responsible up by the balls.

Keep the little man down that’s their motto!!
 

ssl

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I would say that both sides have faults.

The first thing, as part of someone who is researching getting a loan is to research, not just pick one, based on what one person says; "This loan is the best..." is not a guarantee, it is an opinion, mainly geared to get your business.

Now, the first part of the fault lays squarely on the consumer. Getting a mortgage is a big long-term investment in your future, as well as a major source of expenses in the short-term. Research is an important, if not the most important, part of the home buying process. Why would someone not research about mortgages, but research about the car they are going to park in the garage of the new house? Every consumer wants to get the best deal, even the richest of rich is like this, just the description of the "best deal" may be slightly different than that of a middle or lower class definition.

The second and majority of the blame resides on the mortgage companies. Sure, it is a lumped-together insinuation; there are some of those companies that did their business in an ethical way, and are getting their reputations tarnished because of the bigger and badder companies. However, the majority of the mortgage companies will do anything to get the buck; they originate the loan, which incurs fees, then sell off the note, which brings in more money. The experts say that this is what is necessary to keep the money moving... except that that money is never there, how can it move if it does not exist? That is the error, buying and selling mortgage "securities" -- the money is not there, nor is it secure in the idea that the consumer will always make their payments on time. That is not guaranteed, and therefore was the downfall of the mortgage industry, requiring a fake recovery.

Reassign the bail-out money to education, mainly to the young people to realize that economics is nothing short of supply and demand, as well as savings is where it is all at; a penny saved is a penny earned. Benjamin Franklin was not just coining a phrase, he meant it. Let those at the top learn a lesson; if the government bails them out, they learn not a lesson, but a shortcut to *easier* monies; Sounds like a great example to be set for generations to come, as well as those nations around the United States to see what really drives the United States: corporation versus constituent.
 

Carthage

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Newsweek: Whose Fault Is This?

Is this an example of adults making bad choices/being greedy? Is it an example of Mortgage Brokers being greedy? Or is it a combination of the two?
.

It's a result of being irrational. Home owners should do a lot of research and be absolutely sure that they'll be able to cope with it, and not just irrationally go with whatever they can get without a well informed opinion about the future.
However, the mortgage brokers also were irrational. Being in the business, they really should have thought a little bit about what would happen in the long run.
So everybody was being irrational, and that's why we are where we are. Same goes for almost everything else in the world today.
 

BadBoy@TheWheel

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If you delve deeper into the history of sub-prime lending, you will find that MANY folks were mis-led by mortgage brokers/lenders into thinking they could afford more home than they could.

It's easy to stand back and say "well they were idiots, they never should have bought that much house", but everyone of us at some point has wanted more for ourselves and our children, it's easy to get ensnared into traps when you have that focus.

Do some research before you judge too hard.

Regardless of who's to blame, it's a mistake that is going to cost the American taxpayer billions.

There is already a mortgage bail out getting passed through congress.
 

Carthage

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If you delve deeper into the history of sub-prime lending, you will find that MANY folks were mis-led by mortgage brokers/lenders into thinking they could afford more home than they could.

It's easy to stand back and say "well they were idiots, they never should have bought that much house", but everyone of us at some point has wanted more for ourselves and our children, it's easy to get ensnared into traps when you have that focus.

That doesn't excuse irrationality. I understand, yes, and I didn't say I laid the entire blame on them, but they were still irrational, and that's a sin very hard to excuse, in any situation.
And on being misled- enough research would prove anything, but once again, home owners weren't the only ones who were irrational. Deluding others in this situation was not only irrational and dishonest, it was a bad mistake on their part in the long run.
So they both were irrational - and that never ends well. But yeah, the brokers were probably more to blame.
 

BadBoy@TheWheel

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That doesn't excuse irrationality. I understand, yes, and I didn't say I laid the entire blame on them, but they were still irrational, and that's a sin very hard to excuse, in any situation.
And on being misled- enough research would prove anything, but once again, home owners weren't the only ones who were irrational. Deluding others in this situation was not only irrational and dishonest, it was a bad mistake on their part in the long run.
So they both were irrational - and that never ends well. But yeah, the brokers were probably more to blame.


That post wasn't aimed at you:D

I also have the luxury of living next door to a retired Chase V.P. (he worked for them for 42 years)

We talk:nod:
 

Tim

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I don't think the blame can be placed on either 100%... there is definitely a mix here.

On one hand, the home owner needs to understand the consequences of their actions when they sign the contracts. The ones that are getting into trouble gambled on interest rates staying low. A very dangerous thing when Bush is in the White house :24:

On the other hand, there were more than a few mortgage brokers who were interested in one thing only. Making the deal. They knew full well that they weren't going to be on the hook if and when these would go into foreclosure. They were going to bundle them up and pass the buck as quick as possible. That doesn't make good business sense at all. If the mortgage companies sold responsibly, then this wouldn't be an issue. It IS their job to make sure that they are not selling more to the consumer than they can pay back. Hell, would you lend your friend $1,000 if you knew they couldn't pay it back? Hell no you wouldn't. So is it your friends fault or is it yours?
 

Gomjabber

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Oooooh, I feel way to new to comment on this subject but it is a subject that makes my blood boil.

I think there is plenty of blame to go around but I am sorry, this falls on the home owner most of all.
My wife and I have scrimped and saved for 11 years and live in a very modest 4 bdrm house built in the early 70s.
Most young people today would find our house not acceptable as a first time house and this is our 3rd house.
We worked our way up to this, have a fantastic mortgage of 5.25% and also we don't have any other debt.

I find it troublesome that I will have to bail out a bunch of people that have made poor choices (this includes bear stearns and the others)
Ultimately what will happen to most of these folks if they lose their house? Go back to renting is what will happen and I say that is not such a bad punishment for a poor decision. In a few years they can try it again.
 

Minor Axis

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I find it troublesome that I will have to bail out a bunch of people that have made poor choices (this includes bear stearns and the others)
Ultimately what will happen to most of these folks if they lose their house? Go back to renting is what will happen and I say that is not such a bad punishment for a poor decision. In a few years they can try it again.

There is a group of businesses who made a fortune pushing scam loans doomed to failure to people who were told they could afford them but really could not.. There is a group of investors who bought these loans after the fact that are now holding the bag. The U.S. Government/taxpayers will be doing the bailing. It's not just about homeowners making bad decisions. It's about a system prone to fraud due to a government who has moved towards allowing corporations to run the country.
 

Gomjabber

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There is a group of businesses who made a fortune pushing scam loans doomed to failure to people who were told they could afford them but really could not.. There is a group of investors who bought these loans after the fact that are now holding the bag. The U.S. Government/taxpayers will be doing the bailing. It's not just about homeowners making bad decisions. It's about a system prone to fraud due to a government who has moved towards allowing corporations to run the country.


Too much political crap in that statement.
Anyway, I fail to see how these people could not see what they were getting into. What is so hard to understand about an adjustable rate mortgage or one that is only paying interest and no principal?
Still seems to me that some people made some really bad decisions, both lenders and borrowers and I don't see why I need to bail them out.
Just more exploitation of the solid go to work everyday middle class.
 

Minor Axis

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Too much political crap in that statement.

allowing corporations to run the country? Yep it's crap that is going to sink us as a nation. Feel free to blame the suckers as they do bear some of the responsibility, but don't let the weasels off the hook.
 

Minor Axis

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And Mulder you think things are just peachy-keen don't you...

psst, I don't feel like jumping through your hoops today.

This is a PDF link. Heritage.org

The Financial Crisis. These problems originated
in the mid-1990s, when mortgage lenders
relaxed the previously strict financial qualifications
for obtaining a mortgage to buy a house by offering
mortgage loans to credit-impaired households,
albeit at higher interest rates to compensate for the
greater risk. Despite the many different forms that
these mortgages would ultimately assume (e.g., no
down payment, interest-only, and negative amortization),
they were designated “subprime” because of
the borrowers’ checkered credit histories. Despite
the risk associated with these subprime mortgages,
many mortgage lenders further relaxed their underwriting
standards and in the process introduced
even more risk into the system, some of it motivated
by fraud and misrepresentation.


While it can be argued that the trend began in under Clinton, with a pro-business administration they accelerated and came to fruition under Bush with the downturn in the economy orchestrated by a variety of poor economic decisions by a bungling go-for-it leadership.
 

gLing

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It's both. You have people taking out loans they can't pay and then you have lenders giving out loans they know people can't pay.
People should never be told they can afford anything. Use your own head and figure it out for yourself. It doesn't take rocket science to figure out if you can afford something or not no matter how slick the salesman is. Always read the fine print.
 

Strauss

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And Mulder you think things are just peachy-keen don't you...

psst, I don't feel like jumping through your hoops today.

<SNIP>

While it can be argued that the trend began in under Clinton, with a pro-business administration they accelerated and came to fruition under Bush with the downturn in the economy orchestrated by a variety of poor economic decisions by a bungling go-for-it leadership.

Your premise that the loosening of credit requirements was the result of "pro-business" administration is completely incorrect. Clinton was motivated to do so to increase minority ownership of homes. His administration asserted not to do so would perpetuate the discriminatory criteria established by prior Republican administrations. The fact they any economist with a brain saw what was coming didn't slow Billy-Boy down in meeting his campaign rhetoric. Clinton's decision created a whole new market place for both the legitimate and illegitimate mortgage lender and had the unintended consequence of creating a whole new secondary marketing of mortgage backed (and leveraged) securities that for all intents and purposes was unregulated.
 

Strauss

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That what I was trying to Minor to acknowledge. While he likes to complain about the current administration, the only answer--the only way to have avoided the current problem would have been for the Federal government to have mandated stricter credit requirements. Well now guess what the liberals would be saying if Bush tried to do that? You got it--screwing the poor because the effect of tighter credit means less mortgages for the poor and middle class--the rich will still be getting their mortgages no matter how tight the credit requirements.

Also, the bail that's coming will be paid for primarily by the rich and upper middle class who pay all the taxes. Since a full 1/3rd of wage owners pay no taxes, the poor have benefited significantly from the looser credit requirements and will continue to do so. The irony here is that by Minor beating the drum for more regulation of banks means that the poor and lower middle class will get screwed--again--which more times than not is the end result of stupid liberal economic policies--which just keep coming no matter how much they fail.

Well like or not requirements are going to tighten, not just on borrowers but lenders as well.

I don't see there being a bailout as the secondary mortgage market (as a process for bundling and securitizing the loans) is fundamentally sound. The banks have been forced to do a massive write down of their portfolios (no spreading it across quarters) by the Fed, Treasury, FSAB and the SEC.
 
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