One of the most annoying things I keep hearing on the news is the notion that the mortgage industry problem is caused by "irresponsible home buyers" that for whatever reason bought homes that they knew that they couldn't afford.
My biggest issue with this is the insinuation that the problem was caused by millions of irresponsible people that somehow had the power to approve their own loans. How is it that the media, including FoxNews is neglecting to acknowledge that BANKS decide which loans get approved and which get denied?
With the exception of certain lending institutions such as Freddy and Fanny, the push for sub prime lending was not a result of government pressure. It was a sign of greed withing the mortgage industry. The loans that were being advertised and spoon fed to the "irresponsible" home buyers were no accident. Even if greedy realtors were taking it upon themselves to market the dangerous loans, the BANK decided if it was going to fund the loan.
Irresponsible Home Buyers is a distraction from the real issue.
1. Realtors specifically marketed risky loans in an attempt to sell houses that were extremely overvalued in a market that was expected to soften considerably.
2. Banks approved and funded those loans knowing the risky nature of the papers and the overvalued nature of the asset.
3. Bankruptcy laws were tightened to limit bankruptcy options
4. The safe payment era of the risky arm loans expired and the real payments started coming due.
5. As houses foreclose, the market begins to slide.
When a homeowner can see this coming, how can a rational person believe that the banks that funded these loans were clueless???
To the credit of the Irresponsible home buyers, many were led to believe that growth was going to continue, even with the interest only options, they would be able to live in their home for a couple of years, sell it, then buy a home they could more easily afford with the profits. While this is similar to gambling, it was also based on lies. Realtors in the early 2000's were not always honest with their buyers.
The bottom line is that the people responsible for this issue are NOT being held accountable in any way. This was not an accident. Look at the data for the last 10 years. The signs were there. We saw them and worked on getting out before the storm. However, things are worse than even i had anticipated. Unfortunately, we're not at "the bottom" yet . . .
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