Another Mortgage Crisis question - When I ask about it happened, I usually get answers that put the blame

Question

on the consumer.

And, clearly, they need to be responsible for their own mistakes.

But we have always had ignorant people who try to buy more than they can afford.

WHY is this different? How were so many people able to get loans they couldn't afford?

Isn't it the responsibility of the Bank to assure the person applying for the loan has a reasonable chance of making payments?

If you MUST bring up Bush or the Republicans in your answer, please explain how they are involved, instead of just saying "they want to do away with meddle class." like these people.http://answers.yahoo.com/question/index;_ylt=Ai1faiN.7eQZhtL1N4d0uQ7sy6IX;_ylv=3?qid=20080812081011AAjkuK5&show=7#profile-info-AA10222223

Answer 1

the investors in the mortgages let the underwriting get lax. So we as an industry allowed people to go into these hybrid loans and many did not understand what the terms were the borrower just wanted to buy more than they could afford and if you weren't comfortable doing the loan they would get some one who would. So the industry as a whole is to blamee.  

Answer 2

All credit issuers are to blame.  Yes, the bottom-line responsibility is the consumer, you must be able to handle what you sign for.  However, it is a known fact that all credit issuers are looking to make money.  And bad-debt write-off, although a negative, is still just that.  A write-off!

And why is EVERYTHING in this country Bush's or the Repubs fault?  I swear, its always interesting how opposing parties try to bring out negagtives on either side during an election year.

Answer 3

There is plenty of blame to go around. First the consumers, who were taking out adjustable loans when interest rates were pretty low to begin with.

Second, you have to blame the banks and mortgage people that were pushing people into loans that they knew they couldn't afford. Most were just offering products that were out there. Some were committing fraud by lying to the consumers, etc. Telling them just refinance when the rate adjusts. If you do refinance, you are assuming the value will go up and the interest rates will go down. That is a big assumption.

Third you do have to blame the banking regulators (not just the Republicans, but the overall government).

This whole thing just got way out of hand and now those of us that pay our bills every month and are responsible get the short end.

Oh, by the way. All these people that Blame Bush and the Republicans? Just remember this is not a dictatorship. The President doesn't have almighty power. The Congress is controlled by the Democrats, they are the ones that make the laws.

Answer 4

Crooked mortgage brokers knew their clients wouldnt be able to afford sub prime mortgages, and gave them anyway to make commissions for the month.

See Wikipedia http://en.wikipedia.org/wiki/Subprime_mo...

Answer 5

No the bank isnt respnsible to make sure the people can make their payments.  They work with the information the consumer gives them. And most of them come up with confirmation that the info given is true, even if its not.  A Bank is not going to go chase after info.  If the bank doesnt get paid, then the bank takes it away. "Checks and Balances" dont work if the consumer lies about income. (and in my experience, most do, just to get the house).

People should never glorify their earnings or say they get cash at a second job and have that counted in their earnings. You are basically asking a bank or lender to babysit. And while the information that they are given may be true on paper and it seems that they can afford the payments, many cannot prioritize their spending, which has nothing to do with the bank.  As I said, a bank or lender is not a babysitter.  So the abosolute fault lies on the consumer.  The only exception I can think of is the economy that we are in.  When the housing market went downhill and the interest rates rose and mtg payments doubled.  That is neither the fault of the lenders nor the consumer.

Most landlords require that your income be 3 times the rent asked.  That is also a good receipe for buying a house.  If you dont make 3 times what you find out your payment would be, then you cant afford it.  And you ALWAYS have a reserve in the bank of at least 1 or 2 payments that you can fall back on in an emergency.  Do not ever touch that reserve for anything other than an emergency mtg payment.

Answer 6

You need to remember the money the banks lend isn't their money; it's money they have borrowed from individuals.  Therefore, there are rules to avoid banks from making too many risky loans.  

Banks found ways to cheat by making risky loans look safe.  Debt rating agencies marked the risky debt as safe because that what the banks were paying them to do.  Appraisers made the debt collateral (houses) look better than they were because that's what the banks were paying them to do.  Banks made record profits during the bubble years.  They were convinced they could get rid of the risk on their iffy loans by selling them to some greater fool.  What they didn't realize is that they were receiving risky debt that other banks were trying to get rid of too.

Although the banks created this mess, the regulators should have put a stop to it way before it got so out of hand it inflated house prices.