In a real estate transaction, does the mortgage lender who sells a risky loan to someone he/she knows cannot repay it deserve more of the blame, or is more of the blame to be placed on the borrower for taking out a mortgage that he/she knows cannot be repaid? The intention of this thread is to explore the arguments on both sides and not necessarily to simply place blame, I want to know the reasons why you blame the lender or borrower. Go!
How about the liberals in government requiring the lender to make loans to unqualified borrowers? Are they out of your equation?
Blame is irrelevant. When the borrower defaults, the lender should money and the borrower should lose their home.
Oh, really? The Clinton Administration did not change the CRA enforcement and start auditing banks to see that they were issuing real loans in real bad neighborhoods? If banks did not issue such loans they would flunk the audits and suffer a competitive disadvantage due to federal government regulation. None of that occurred huh? If not, how about the unconstitutional Democrat created Freddie and Fannie who at one time owned about half of all mortgages in the country, and under the 2000 Affordable Housing Goal (four year law that went from 2000 as Clinton was leaving the presidency through Bushs entire first term through 2004 when the housing bubble really rose) sought to greatly expand their low to moderate mortgage holdings? The unconstitutionally created Democrat organizations of Freddie and Fannie were CREATED to manipulate the free housing market, and do so with political motives. Cant blame the free market when it does not exist and it certainly does not exist in the housing market thanks to Democrats. Quit squawking Democrat squawking points and propaganda!
I want an open discussion based on the truth, not falsehoods. Wall Street Led the Toxic Market Fact: The GSEs were prohibited from buying subprime mortgages. Fannie and Freddie could not guarantee or securitize subprime mortgages because subprime loans were outside the prescribed GSE guidelines. All subprime mortgage-backed securities were created by Wall Street firmsnot the GSEs. Fact: Although the GSEs did purchase subprime mortgage-backed securities as investments, they never did so in a volume that matched Wall Streets The GSEs investment in subprime mortgage-backed securities was far less than Wall Streets. Fact: The GSEs eventually guaranteed and created investments with Alt-A loanswhich were not affordable housing loans Alt-A loans went to relatively wealthier borrowers with higher credit scores, though often these loans had risky features such as limited documentation. Fact: Mortgage loans purchased by Fannie Mae and Freddie Macincluding loans to lower-income borrowersare performing better than the private market As of June 2010, about 13% of GSE loans to borrowers with credit scores under 660 were 90+ days delinquent or in foreclosure. By comparison, the serious delinquency rate for subprime loans was over 28%. Fact: Affordable housing loans were not the problem. The GSEs losses were caused by risky mortgages that generally went to borrowers with higher incomes The GSEs financial losses stem primarily from Alt-A mortgages, which are not connected to affordable housing. Abusive loan terms, rather than risky borrowers, bear the greatest responsibility for the foreclosure crisis. Studies show that risky borrowers who received sensible loan terms had significantly lower foreclosure rates than those who received dangerous subprime loans made by non-bank lenders. Fact: The vast majority of subprime loans, 94 percent of them, were made by lenders who were not subject to the Community Reinvestment Act (CRA). The CRA covers banks and thrifts, which didn't make many subprime loans http://www.responsiblelending.org/mo...annie-mae.html http://en.wikipedia.org/wiki/Center_...nsible_Lending
Special interests who profit from misery of others, create wars, manipulate the market etc. people simply do not want to be slaves forever paying $500-$800 in rent, eventually in many cases having to offer up their daughter to the landlord, while the lenders often are just doing their job and nothing more. property tax and some other taxes are just as evil also.
Which is it? Were the GSE prohibited from buying subprime mortgages (Fact 1) or did they purchase subprime mortgage (Fact 2). BTW, neither one of your links were useful as they went to expired or abandoned pages.
one of the biggest problem is that people walk away from a mortgage just because their value on the house dropped even though they could afford the loan..in calif rhe banks cant come after you..
Buying mortgage-backed secuirities is different than buying subrime mortgages. Why did you distort the actual wording from my post? The information was from a thread I stared six month ago...Sorry. Trust me, the links did work at one time.
That was the exact wording of your post. I just cropped the answers. Well, if you find the original, I would be interested in reading it.
If you look at the actual post, it differentiates between subrime mortgages and mortage-backed securities; your wording mentions only subprime mortgages...
You realize liberalism was just the cover story, right? The real reason easy credit was given out so thoroughly was because companies like Countrywide saw a huge market in poorer customers. Creditors make more money from interest than they do from people actually paying things off on time. It works the same with credit cards. They WANT you to pay late. They WANT you to rack up interest and fees. The wager they're making is that you'll end up paying enough in interest and fees that, even if you default, they will make their money back. So the easiest way the subprime market could expand was to encourage legislators to loosen up credit and banking laws. Reorienting the CRA towards easy money for housing loans was a business opportunity -- not really a "liberal reform," and it never would have happened in the first place if lenders hadn't pushed for it.
Correct me if I am wrong, but doesn't that apply to actual physical conditions/defects of the real estate property itself? i.e., if the seller knowingly did not disclose defects of the property to the buyer. I don't think caveat emptor can be applied to the actual contract or terms of the loan.
True. My response was more along the lines of "Let the buyer beware" with all transactions, although I can understand why laws might be passed to protect old ladies and the mentally challenged.
Do you think that laws should be passed or should have been passed to protect home-buyers from risky subprime loans?
And here you go: http://en.wikipedia.org/wiki/Subprime_mortgage_crisis While I agree that wiki isn't the best source, it is usually close to the truth most of the time. Also, I will agree that Government Regulations were not the only contributing factor to the subprime collapse, it did play it's part.
In regards to your original question, the lenders were at fault for not explaining to the borrowers the high risks that the subprime mortgages carried. Also, the borrowers were at fault for not doing there research prior to borrowing. I would place blame at 50%-50% on the issuance of the loan, but I would place the greed and the politics that contributed to the collapse as the core blame for the mess we are in.