Bye Bye Banks and Wall Street

[The Lovely Mrs. tod]

Originally Posted by BarTopDancer

I don't buy the "there was a LOT of predatory lending and pick your own payment option" argument. There is no room for ignorance in a several hundred thousand dollar purchase. The terms were laid out in the paperwork, the people should have read it. Yes, there was some predatory lending - I was targeted. But I knew that I could barely afford it then and would be hosed with the adjustments.

Maybe I should have bought something I could barely afford back then. Then I would have property that I barely can afford that the government is going to help me keep and afford.

I'm not happy about having to pay for those who couldn't bother to read the fine print and got in way over their heads. It's [for the most part] their fault. And if there are lenders who failed to disclose the terms of what the payments could be, then they need to be responsible for this. Not me.

Try again.

The smartest of people miss things in 32 page loan agreements. Just becasue YOU got it all doesn't mean everyone did. There's blame to share, and plenty of banks approved loans they knew full well the customer wasn't qualified for. "But gee, you think $4000 a month is out of your league? Well, we have options, let's look at them. How about $2475, would THAT work for you?" If it were all the fault of the borrower no lender would have to write down up to 30% principle on a neg am loan. Why not just say "I'm sorry, you don't qualify for that kind of loan." Lenders were handing over money as fast as the government could print it.

And no, I'm not talking about people who deliberately lied on their "stated income" app. I'm talking about the people who were promised such a rosy future by their banks, how in five years, even through their payments would double there would be SO many options for re-financing. The people who honestly said "my wife and I clear $60K annually" and were gleefully told by their loan officer "excellent! I can approve a loan up to $425K for you".

No one's blameless. But the mortgage industry (in general, not in specific) failed to work with it's customers an attempt to rectify the problem. What good did declining to modify an existing loan do anyone? The homeowner's on the street, the house sits abandoned, the lender may, if they're lucky, get a short sale on the property. A bank working with a customer to avoid the worst case scenarios that are becoming so common would not have affected you or your loan adversely. It's been a fairly common practice to demand "all or nothing" payments from customers. So here's some honest guy, probably in over his head and the lender says "you owe me $2500. And the honest guy says "I have $1965, I can give it to you right now." But the lender, as a rule, says "nope, $2500 or nothing."

And nothing is exactly what everyone winds up with. The lender's carrying bad paper, the house sits empty and abandoned, the neighborhood propery values go down yet again and another family's on the street. Everyone loses.