Should sub-prime lenders be punished for giving mortgages to those who obviously couldn't afford the risk?

Question

Many people have lost their houses and savings. Shouldn't professional lenders explain interest rate risks to less sophosticated customers? In Wall Street, financial professionals can be sewed for buying investments that are too risky for certain investors. Why is this not the case for lenders?

Answer 1

No, people need to be more responsible for their own actions. If you are an adult and you sign your name to something you dont fully understand you should pay every possible consequence for your action.

Answer 2

Most lenders explain interest rates to their clients. The client signs the loan docs take home a complete set of these same loan docs.

If a person has a 2/28 or a 3/27 they know the rate will increase. I don't personally know a loan officer that does not explain this option to clients that have bad credit and also the jump in interest rate, because they are told to pay the mortgage on time and come back so we can refinance them into a good rate.

Some of these people are investors and take heavy risk in the real estate business.

Now let's take a look at what really happened. The houses these individuals bought did not go up in value as they have been in the past. Since this did not happen the people with these loans do not have the equity to refinance out of these adjustable rate loans. This had nothing to do with their qualifications or credit score. It was all about the market and a down turn in appreciation of the housing market. Instead of a house appreciating by 5%-10% or more per year the house only appreciated by 2-3%.

Had the equity been in the properties as in the past these individuals would have refinanced as before and no one would have said a darn word.

Why should I be punished for the ignorance of others? Shouldn't the borrower be obligated and required to take care of his family and himself and watch and understand what he signs?

All these bills being brought up in Congress is useless, it still will not change the ignorance of most people.

No I think we have enough bills and laws running people's lives that it is not funny. In this business we have so many damned disclosures they might as well be the loan docs.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 3

This is a very interesting question. when things go wrong we always look for someone to blame but the Lenders should not take the blame for the industry. Yes. they provided programs for lower income people, but there are many unethical Realtors and mortgage professionals that worked at making an unqualified borrower look qualified to the lender. the boom was a time where people in the industry had a chance to make money and I believe the real estate/mortgage industry should take a certain amount of responsibility.

Answer 4

No they should not.

If you sign a contract without understanding what it says? Then the only person to blame is you.

I have gone through several closings on homes I have bought and there was never once that if I did not understand something that it was not explained to me.

As a matter of fact the whole process stops until you state that you understand.

Answer 5

No

It is all about personal responsibility. If you could not afford a mortgage, you should not have signed on the dotted line. If you didn't understand what you were signing, you should have asked, or you should not have signed it. It is not the Government's responsibility to bail you out, or to hold your hand and make sure you can read the writing on the contract.

Answer 6

Yes, they should be punished by losing money and then being forced to go out of business. They shouldn't expect to engage in risky practices in pursuit of profit and then expect us to bail them out.

Answer 7

I agree and Congress is working on a bill for the exact same purpose.

Answer 8

Isn't the money they lost on the loans enough?