The borrowers are not responsible, got that?

Many people on DU piss and moan about how they shouldn't feel sorry for the "people that bought to much house" or "or the dumb bastards that borrowed too much on their equity" or "the idiots that bought to many condo's" and that those people shouldn't be helped because they made their own problems and why should we give them a gift?

Well, I got news for you, you've been suckered. Why? Because all these people that you castigate for being "soooooo stupid" had to be approved for their loans. Got that?? Let me repeat it a little louder for you, THEY HAD TO BE APPROVED FIRST!

That is why, the responsibility of this colossal mess falls squarely on the shoulders of the LENDERS.

They could have easily said, "no fucking way are you approved for this 500K house with a 20k per year jobs, are you fucked in the head?" but no. They stamped the approval all over the applications and even going so far as coaching the applicant in how to fill out the application.

So folks, all this misplaced anger has nothing to do with the people who borrowed the money, it's the LENDERS.

Repeat after me, it's the LENDERS. Easy? Now go away and stop bitching and lets help the people of this nation instead of 2% of the population aka rich bastards.

THEY HAD TO BE APPROVED FIRST!

Yes, approved based on FLAWED underwriting guidelines which is the fault of both lenders and entities up the food chain like Fannie and Freddie; but that does not automatically absolve the financial decisions of all borrowers who got in over their heads.

sorry, deregulation is a bitch isn't it?

it still sits in the lenders laps, or do you know of a way where the borrowers can preapprove themselves? I would love to hear it.

I get pre-approval notices for loans and credit cards in the mail every day. I know I could qualify, even with today's tougher standards (which IMO still are not tough enough), to take out a huge equity loan on my house. I choose not to.

...do you know of a way where the borrowers can preapprove themselves? I would love to hear it.

It's called self-discipline. Another very big aspect of the problem is lack of basic financial education.

For the record, I do not put the majority of the blame on borrowers. I think most of them are probably blameless, although information to back that up is not readily available.

still falls on the lenders shoulders.

In the early '80s when I started working in financial services, the S&L I was working for wouldn't even consider making an equity loan to someone who was spending more than 22% of their income on existing loans, or whose current home financing was over 80% loan-to-value. Documentation of income was required, and that was strictly enforced.

That S&L still got into hot water. In commercial loans.

It's really difficult, I think, to balance the needs of lower income workers to have reasonable access to credit with the needs of the lender to get repaid. There was a big thread on here the other day where the OP was demanding that we bring back the usury laws, and the point was made that doing this would effectively cut off credit for anyone below the middle class. On the other hand, I think that the criteria (or lack thereof) that have been used for mortgages recently have no basis in reality. You either can afford the home or you can't, and the Publishers' Clearing House model of mortgaging has clearly done nobody any good.

1) Lenders do not have to approve the loans

2) Lenders SET THE TERMS of those loans

3) Lenders have been known to coach applicants

4) Applicants have been known to be vocally unsure if they can afford the terms, and reassured they can do so by lenders

5) LENDERS APPROVED THE LOANS ANYWAY

No, it really, honestly is the fault of the lenders, not just in some case, but (it appears) in nearly all of them. Certainly, it is so many companies engaging in bad lending practices that it is threatening our entire financial system, and that smacks of a systemic problem. Even responsible people who did live within their means are getting burned because of decisions made by the lenders.

Not only should the companies these people work for fail if necessary and be affected as the market dictates (oh, irony)- their negligence and greed is going to harm us all- but both they and their immediate supervisors ought to perhaps go to jail, on up to whomever in the chain proposed such whacked-out policies. Something demonstrative has to be done to the people who allowed this, or the new regulations will mean little, a mere 'cost of doing business'. I think whatever we finally do to fix this mess must include punishments for the lenders responsible for the housing crisis, and what it has done by its ripple effect to the rest of the industry and our economy.

The services they provided will not magically go away; demand for home loans will always be present for so long as there is a middle class. That the middle class is quickly morphing into something not recognizable as such even ten years ago is beyond the scope of this particular post; I only mention it because it is relevant.

That said, the current crisis could not have occurred if we had in place strong regulations against such practices as caused the crisis and companies which are required to be responsible because it is the law.

"It's called self-discipline."

Then let the lenders show some for a change. Let them take their medicine. They fucked us all over (even NON-homeowners, renters such as myself, who don't invest and haven't bought a home because of fear of this very situation; we will feel the pain from this too, and totally undeservedly so); their careers should die, and a lot of them should be locked up.

Anyone absolving the lenders of full and complete responsibility for this crisis is wrong. The lenders are wholly to blame for this entire mess.

No, it really, honestly is the fault of the lenders, not just in some case, but (it appears) in nearly all of them.

What is your source for this information?

after all it was their job to assess the risk situation. They were supposed to be professionals that people relied on for advice.

a 500K house with a 20k per year job is personally responsible for their situation. Any lender who approved that loan should be out of business.

if you can find me a way were a borrower can self approve a loan, I would love to see it.

There is no incentive for lenders to care much about who they are making loans to.

You cannot con an honest man.

that the borrower was able to self approve his or her loan?

Many of us who bought homes did just that. We felt pressure to buy bigger homes. We were offered "very creative" financing packages to reduce our mortgage costs. We didn't gamble. We did our due diligence. Now, I am afraid that we too are at risk. I don't let the lenders off on this. I don't let the politicians off either. But in the end we are each responsible.

However, we got into this mess because the lenders thought it was easy money and got greedy. The buck stops with the lenders. They easily saw that most of these people couldn't pay off their loans in several lifetimes, but still chose to give them the money, convincing these poor bastards into thinking home ownership is within their grasp. That is not a responsibility shared by the owner, that is colossal smoke blown up someones naive ass to the lenders can make money.

the borrower signed the paper and iot is not a loan until he does. Sadly there is such a thing as personal responsibility. As the old spanish saying goes - take what you want from life but pay for it.

There are plenty of people who got reasonable mortgages, spent wisely, but are now in default because of the incredible increasing price of, well, everything. HOWEVER... There are a lot of people who should have known better, should have understood how to work a calculator, and who were happy to take the no-questions-asked-you-are-preapproved mortgages, and I do not accept "but I was approved" as an excuse for those people. At some point you have to take personal responsibility for your own finances. Nobody has ever been forced to sign up for a mortgage when buying a house. There are some people who are definitely getting the short end of the stick, but there are plenty more people who GAVE themselves the short end of the stick. It sucks, yeah, but foreclosure isn't the end of the world. I doubt it's a mistake they'll make twice.

private financial choices and taking the public blame for this whole debacle.

The lenders are to blame for not using proper lending practices. Wall Street is to blame for packaging mbs in a way that was almost guaranteed to fail due to aforementioned lending practices. The government is to blame for failing to regulate the mortgage market and mbs in a reasonable manner (this does happen in just about every other first world country, which is why you only see this disaster going on in the US, even though European housing markets have been hit really hard.) But yes, the borrowers are to blame as well, for ignoring the first rule of borrowing, which is "If a deal sounds too good to be true, it probably is."

Trying to scapegoat one organization or group of people for this crisis is pointless and stupid. I have equal loathing for the people who put all of the blame on Bush and the people who put all of the blame the borrowers. It's stupid and counterproductive. What we need to do is fix the system. Then we can have fun with the assignment of blame,

never existed, to me absolves the borrower. However, I am not above the belief that there were borrowers and lenders who colluded to game the system. or Borrowers who knew fully well what they were doing. Those were few and far between. The morons that bought to many condo's or houses in hopes of flipping them were the "I can get instant rich without working" fools that the lenders made meals of. Those types were a dime a dozen and had delusions of grandeur in their eyes. It wasn't until the collapse happened that they realized how stupid they were. And thus gamed by the lenders.

Unless you're assuming the borrower is an idiot, they should be able to work a calculator (or find the help of someone who can) and pay attention to the first rule of borrowing which is "If a deal sounds too good to be true, it probably is." Lenders, borrowers, the government, Wall Street - all of them have a share of blame in the current catastrophe. I am not willing to absolve people of guilt simply because they were greedy or stupid. If that were the case, Wall Street wouldn't bear any responsibility for this mess either.

never has been.

people are responsible for their actions.

:shrug:

on an individual basis- they'll all be a lot more well off before the mess started.

which is why i want them to go beyond limitations on executive compensation, and move on to asset forfeiture/seizure.

If someone is so reckless that he/she is willing to SIGN for the responsibility to service a note over the course of 30 years without having done the math, then that person is a sociopath. I'm a left-liberal and always have been, but some of the selfish imbecility exhibited on this board boggles the imagination. One would think that no employee ever tried to scam an employer, that no strike was ever a solipsistic miscalculation, that no personal crisis was ever the fault of the person him/herself.

I, as a homeowner in Los Angeles, will pay more and more for services due to the many defaults. Trash collection just went up in a big way, and the state budget JUST passed. Those of us who lived within our means pay for the flippancy of those who didn't even think they had to accurately assess what their means were. We'll pay for it outright, we'll pay for it in reduced property values, we'll pay for it in increased crime, and we'll pay for it emotionally as we all make our ways in a world shrouded in more sadness and defeat.

W.C. Fields overstated it, but there's a serious vein of truth when talking about those who lied about their income to get mortgages they couldn't afford: "you can't cheat an honest man."

People who signed for adjustable mortgages when the interest rate was 2% should have stopped and thought about the next 30 years. Sure, predators are sitting there poised with pens in their hands, but that doesn't absolve one of ones reckless obliviousness. Each person who signed a mortgage signed a mortgage. It's a tiresome assumption of modern society that nothing's every anyone's fault, but reality will be served, and those who lied or miscalculated or didn't even bother to calculate have done us all a disservice; yes, the thieves who suckered them are worse, but PLENTY of responsibility is to be borne by the fools themselves.

Math just isn't cool. Things will work out. I'm entitled to this. Everyone else is doing it. God wouldn't do this to me. Whatever the flimsy, piddly little excuse for not having a sober assessment of one's financial situation, it's still, at its heart, A BETRAYAL OF ALL OF THE REST OF US.

That said, this is the simple and obvious conclusion of deregulation: regulations are laws, and the only people who don't like laws (not necessarily ALL laws) are criminals. The Reaganites had us dancing their merry tune for nigh on thirty years here, and now they're up a creek. Will the lessons learned be applied? Stay tuned.

Still, absolving reckless nincompoops for their unrealistic fantasies just makes those of us who also rail against unchecked corporatism look like sniveling simpletons too. Threads like this fuel reactionaries' bigotry that leftists are simpering children who don't take any responsibility for their actions. I, like many, am rather harsh to those on my side who are acting like shrill nuisances.

It takes two to tango.

but that doesn't mean it actually happens. LOLOLOL

people need to know and understand what they are signing- or not sign.

:sarcasm:

This is across the board. There are plenty of average or upper income people who've defaulted.

:eyes:

Name one. Preferably one that's not bankrupt or being bailed out for epic fail.

Please go back and read them carefully. I think I should have put a sarcasm tag on what I considered an earlier post that was OBVIOUSLY sarcasm. What planet are you from? Not from around these areas, that's for sure.

Ergo, anybody who has favored the gutting of usury laws over the last thirty years or so is to blame.

THEY weren't the ones approving the loans- they were just getting paid based on the number of loans they closed- if the borrowers were being approved- it's not really their concern either. right?

borrowers and lenders were both greedy in this mess.

Let me rephrase that.....some borrowers. All I need to do is look at all of the McMansions with foreclosure signs in front of them. These are adults -- THEY are responsible for the choices they make. I bought a modest house and could have bought a McMansion based on what I've seen and heard. But I set a budget when I moved -- I had to come in within the budget including buying the house, moving, fencing and anything else that might have to be done after buying. And I did come in under budget. I bought a modest house that I knew I could afford and now own outright. I also bought with energy costs in mind so now I have a house with a heat pump and I can afford to heat my house this winter. I made that choice because I knew damn well if I didn't make that choice I'd be house rich and bank account poor. Had I made the choice to reverse that, it would be MY responsibility! And had I made the latter choice, I'd have lost my house to foreclosure.

Now, there are lots of people who got snookered. I don't blame people for not understanding everything about their mortgage -- millions don't. They were sold properties with inflated appraisals and that's not their fault. Yeah, I know some here will say it was but truly, we're talking about a country where about 45% would still vote for John McCain -- we're not talking about a country full of rocket scientists. And perfectly honestly, I am a rocket scientist (well, a Ph.D. anyway) but financial stuff is NOT my thing -- I have someone I consult for that. She gives me superb advice even if she is a Republican. :P And I don't blame people who had a house they could afford 5 years ago but lost their job or had similar circumstances out of their control.

We've become a disgustingly status conscious, consumerist society. I have no sympathy for the person who wasn't adult enough to know they really couldn't afford to heat a 3500 sf house but HAD to have it, along with granite counters and every other little luxury they thought they HAD to have. And two honking SUV's in their garage. I have zero empathy with the person who HAD to not only keep up with the Jonses but better them. They fell for that crap, the result is their problem. Well, now it's ours too.

I agree that the majority of the blame should fall on those people an institutions that profited greatly from the situation, BUT some blame must and should fall on borrowers who made very bad decisions.

Some borrowers were the victims of fraudulent appraisals, misinformation, and a host of other predatory lending tactics. Many others, however, made terrible decisions on their own. I don't know that separating those two categories is possible, but that doesn't mean that every borrower is without fault in this situation.

Call me elitist, but in my experience, the "average american" has always been a bit of a bell curve mix where there's a above-average category, an average category, and a below average category when it came what their personal makeup was - be it in ethics, "character" (whatever that means), intelligence, education, opportunities, whatever. I wouldn't ask a GED grad convenience store clerk to brief a death penalty appeal to the Supreme Court; that wouldn't be fair to any of the parties involved.
If you looked a successful credit applicant mixture - percentage of intelligent americans with enough financial education and strength of character not to be sold a bill of goods by a really good salesman, you'd only be looking perhaps 40% of the population. The rest can get snookered, either through a lack of intelligence, lack of financial education, and "need".

There are several different types of borrowers that contributed to the mortgage crisis in one degree or another - the scammers working with real estate agents to get money from lenders using fictitious or stolen identities, the flippers who wanted to "get rich quick" easily, and the working American who had very little idea how financing works. The scammers and flippers walk off leaving the banks with empty properties that are overvalued and usually trashed - and the scale of the loss is usually around only $50K - $100K per property foreclosed on - tough for a bank to absorb, but not devastating. It's the families, the working Americans, that make up the majority of the defaulters now.

These are cases where it's a case of a lender preying on an "average worker" by using their dreams as bait along with some really nice sounding lies. You know, like "9-11" or WMD, or "We gotta fight them there or they're going to come here.

Never underestimate the power of a good salesman. They've got an intuitive grasp of psychology to bring to bear that is very difficult even when you think you "know better". I've known too many people who got way over their heads in debt because they were nice people who wouldn't think that some salesperson would be that greedy enough that they would go out of their way to set up someone else's destruction for their own profit and they were too proud to admit they could be wrong.

I agree with the OP - without the LENDER willing to cheat and game the system, there would be no clueless, desperate borrower stuck in soon to be foreclosed on property. There may be a clueless, greedy would-be borrower, but they would still be a renter, not a mortgage holder.

Haele

It makes no sense. Lenders would have to be forced to give loans to high risk borrowers. Credit requirements changed somewhere along the way. The lenders are not in business to lose money or go bankrupt. It deserves some research.

The institution that makes the loan sells the note to an investor (e.g. Fannie Mae) before the first payment is due, so the originator of the loan does not suffer any consequences when the borrower defaults.

There are standards, regulations,etc that the loan companies should have held to for their own sake and ours, and didn't.

I think it is all about bundling these mortgages as investments and selling them to investors. A number of bad or defaulted mortgages could probably be weathered by lending institutions, albeit, it would have hurt them financially. But, the selling of these as bundled investments and the corresponding cds that the investments generated severely taxed the monetary positions of the big financial houses and they were unable to meet the debt they generated. If it was just bad loans on property there would be assets government was getting and it would be more like the S&L bailout, but the fact is its all bad paper investments that are driving the crisis. Investments that are essentially worthless.

I'm not a financial whiz, but someone posted a link to a article that explained swaps and derivatives and I think that is the crux of the problem and it's huge. These banks and investment firms don't have enough money to cover their swaps and because of the bad loans they made can't get more loans to cover them. If it was just defaults on bad real estate loans they could survive, but when they could no longer cover the derivatives they failed.

So, frankly, as much as I am willing to chastise people for buying more mortgage than they could afford because they didn't take into account rates going up or didn't understand how the rates going up would cripple them financially, they were being scammed by lenders who were only concerned about turning a buck and on top of it selling the packaged loans as financial investments to pension funds, etc and using derivatives to make even more money.

Many got coerced and suckered into buying "too much house" by a mortgage industry determined to cynically exploit them. Is that their own fault? Well, only for not knowing better.

This culture is full of SHARKS. You can't entrust your welfare to the "work and consume" messages promoted in this culture. You will be led down the garden path and left holding the bag.

You're buying the Republican spin. Sure, there were some irresponsible borrowers. That's not the point. Borrowers alone could not have created this crisis. In fact, borrowers couldn't even pull it off with just a little help from the lending industry. It required the lending industry and the investment community leading the way.

But that doesn't change the fact that the borrowers can't afford what they agreed to pay for their homes, which is why they should not be bailed out either - unless you are going to give EVERYONE who can't afford to buy a home an EQUAL stipend.