Quote:
Originally Posted by Kevy Baby
About the only Latin I know is Caveat Emptor. While there were mistakes made on both sides (lenders and buyers), the majority of the blame seems to be falling on the lenders.
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The majority of the blame does belong upstream from the individual homeowner.
Sure the mortgage company and the homeowner can split the blame 50-50 on the stupidity of the initial loan. But the homeowner gets none of the blame for that stupid mortgage being repackaged in such a way that the entire world economy comes to be so dependent on ever increasing home values that a widespread 5% value drop and less than 3% default rate triggers a global economic crisis.
Yes, there was a lot of homeowner stupidity. But then there are a lot of simply not well informed/educated people who can obviously see that they're getting more than they think they should be able to get and yet being told by a massive international corporation "hey, we're experts in this. No, you can't afford the balloon payment but you'll never need to make it. In a couple years, you can refinance and get out if it, you're personal income situation will likely have improved dramatically since that is the standard life cycle for people, and worst case scenario if you don't you just sell the house at a small profit and move into something smaller when the time comes. We don't want to foreclose on your house so this must make sense, why would we give you money expecting to lose it?" You may recall a thread here on LoT a couple years ago when someone was asking for advice on whether to refinance their loan into some option arms. Fortunately, I believe if you go back and look at that you'll find the LoT giving good advice (primarily that the loan was structured on the faulty assumption of guaranteed appreciation of the home) but there were compelling arguments in favor and the last 15 years supported them.
On top of this you have major "how to" organizations telling people that if you aren't continuously extracting equity out of your house (read: living perpetually at maximum debt) then you're a sucker (for some reason I haven't seen so many people reading
Rich Dad, Poor Dad on the train this last year and some).
Lani and I have watched over the years wondering how it is that we make 2-3 times what most people we know do and yet we're driving around in one $22k car, no kids, and an apartment and not exactly socking it away. Yes, it could be said we were very prudent and smart about the whole thing. We're just lucky in that we are temperamentally disinclined to each own a nice car (seriously, if I really wanted to I could have my dream car, an SL500) or even our own house (mostly just lazy, we hate shopping so much that buying a house seems like pure torture).