We're being told that a lot of people who got involved and hurt in one or another aspect of the subprime mortgage debacle didn't understand what they were getting into.
I don't know how true that is but I have a suggestion that might help us avoid a "next time" or if there is a "next time," hold the people who got involved more responsible for their own actions.
Let's go back to calling subprimes what we used to call them: high risk mortgages.
Monday, January 28, 2008
A subprime mortgage suggestion
Posted by JWM at 5:00 PM
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9 comments:
I was glad that people who normally could not buy a home were able to do so. But of course, the lenders had to get greedy and raise their rates so high that the folk could not afford to pay the morgage. Now the banks, etc are sitting on all those empty houses. the banks deserve it,
Those high risk mortgages should never have been made in the first place. They were approving people who were up for eviction every month for a year on rental accounts. They KNEW the people could barely make the original payments and they KNEW that if the payments were increased, they people most likely would default. The lenders are the culprits, not the ignorant borrowers (though many were ignorant). Rates should be frozen on those loans to punish the lenders.
The next time, I hear someone make excuses for people who knowingly took out loans that they couln't afford, I think I'm going to scream. Yesterday there was an AP wire story with a quote from someone bemoaning the fact that these people were foreclosed on... all because those evil banks had loaned them money even though they had lied on their applications. And this person was complaining because the banks had not done due diligence on the loans.
Please, if you are a shareholder of these banks, you have a gripe, about the directors and loan agents who gave the loans, but also for every borrower who lied and committed fraud on their mortage applications. Yes, folks that's what it is, fraud. They should be lucky that they are not charged with fraud and sued along with the banks only because they are too numerous and don't have deep pockets.
We have lost all sense of personal responsibility both for ourselves and demanding it of our countryment.
I'm sorry that people who could not realistically buy a home bought a home. And yes I get to complain because this is going to come out of my pocket just like the S&L crisis.
Honestly, both the banks AND the borrowers are to blame. The only people that deserve to be saved from this debacle are borrowers who took out ARMs, made all their payments as designed, but now can't refi to a fixed rate (historically low right now) because the rules changed on them. If they weren't making their payments to start with...well, they shouldn't have had the house.
This country is rich enough to feed and give health care to all the people. I don't care if it comes out of my pocket.
John:
I guess i am perplexed why there is such confusion on the housing loan debacle. The problem (and the solution) is easily defined. The lender must charge the proper risk premium.
Anyone who has ever bought a new or used car knows what happens. If you want credit, you visit the "finance" manager. Your interest rate and down payment is determined by your credit rating.
Some loans from people with poor credit will default. The interest premiums that are charged allow for that while still maintaining profits for the lenders.
What's happened in the housing market is everyone got the same low interest rate. Who's fault is that?
I would say the major burden of responsibility lies with the lenders. Low interest teaser rates, no money down, no income verification are recipes for failure in the loan business. Any bailout that rewards financial institutions for bad business practices is ill advised.
I am sure there are some customers who falsified information on their loan applications. Those people should not be protected from their loan obligations.
The market has already corrected the loose loan practices. It will just take time to unwind from the excessive prices (not inventory) that the credit bubble built up.
Ken
Dallas
At the risk of beating that dead horse once more, let me add my two cents' worth. Many of our society's problems today rest on the inability of people to accept their own personal responsibility for making bad decisions and then expecting everyone else to make amends. Sure, as one poster says, this country is rich enough to ensure food and health care for everyone, but that's not how it should be. Pure Marxism says "from each according to his abilities, and to each according to his needs." This system works just fine when a cummunity consists of volunteers such as a monastic order or a commune. When it involves everyone, it simply won't work because there will always be those slugs who decide not to work and then accept the largesse of others' labors. We are supposed to be a unique experiment of individual responsibility and it worked well until recently. I see it beginning to unravel and "responsibility" seems to be the missing link. I feel much better now.
Folks,
I agree with everything that's been said on this thread except for Anon @ 12:13's comment about costs coming out of his pocket.
If the costs just came out of Anon 12;13's pocket I'd have no objection.
But it comes out of the pockets of tens of millions of us with the government deciding from whose pockets it will pick and how much and to whom it will give a portion of what it picked, always remembering it has to keep part of what it picks for government expenses, etc.
Thank you all for commmenting.
John
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