How have lending institutions become such a corrupt and greedy business in recent years?

Question

For the most part, they do not do business ethically, nor on any terms which aren't designed to screw the consumer. This is one big reason the housing market is upside down these days. Should laws be made to regulate this problem?

My theory is that the brokerage market became more competitive in recent times as more and more people pursued that career. I also believe the new bankruptcy laws made banks more flexible, knowing they had more of an advantage if the consumer defaulted.

I read everything before I sign. Thus both of my homes are fixed for the next 30 yrs. My issue is that there seem to be an overwhelming amount of people recently who apparently haven't "read" everything. In fact enough people that this is causing strain on the economy due to the housing market collapsing. Apparently many people aren't educated these days when it comes to money, but then again I think the banks should take this into account when they go handing out loans, as this only comes back and hurts both them and the consumer later anyways.

Answer 1

I think that it started with the investors and their guidelines. The people forget that 10 years ago, they needed a down payment, needed to prove their income, had to have money in the bank. When the investors 'created' this sub-prime catastrophe how else were the banks supposed to keep up? I mean it's crazy to think that you could have gotten a stated income, stated asset loan with 100% financing, etc. I think it's a good thing that the market is correcting itself because now we're getting back to where we should be. The key here is that the consumer needs to have realistic expectations of the industry and stop blaming everyone for their foreclosure woes. You don't just sign a heap of documents without fully understanding the terms. If you know you can't afford it, or are counting on a raise to 'get you through it' you are dead wrong! There are corrupt people in every industry - and we (as loan officers) are in the spotlight because of the industry attention. I can assure you - those who sign on the dotted line weather it was a good decision or not, was an entirely conscious decision. Here is the fix: Don't bite off more than you can chew! If you can't afford it, you can't afford it!!! Pay off those bills, and free up your money so you can afford it. Keep a consistent work history. If your credit is bad, it only takes the decision to commit to fixing it. That's the hardest part, is deciding to change your spending habits. If you can't do that, then you shouldn't buy. Period. You can bring laws into it and punish the loan officer, and the broker. Thats not going to help. The Investors are the ones who set the standards and made the approvals. So if you going to bring 'law' into it, regulate THEM. Loan Officers and Brokers have NO bearing whatsoever on this. Now, like I said earlier, there's corrupt people everywhere. Most Loan Officers that are still doing business today and have made it this far in the business with what is going on must be pretty good at it - a loan shark can't make it in these times. There's no room for error and every loan is scrutinized X10.

Answer 2

There are many lenders that deal in shady practices, but there are many more that do not. I work for one of the "BIG" banks and although there are individuals in every company that are lousy, on the whole this company treats its customers in an ethical and conscientious manner.

As consumers, we've taken on a victim mentality. We don't know what we're signing, but we put our names on the dotted line. When things don't turn out as we expect, we have to blame somebody: "I would never have done that had I known." It's your business to understand the terms of any contract you sign. It's your money, and you're the one who'll get screwed if you don't know what you're doing.

Some lenders have been very happy to take advantage of consumer stupidity, but anyone who signs a loan document he doesn't understand is looking for trouble. There are some loan options that don't suit every consumers' needs, but that doesn't mean the consumer won't want it. Last summer interest only loans were really hot. Sure the payments were lower, but after the interest only period, you still owe the entire principal. Is your income going to be a lot more in 3 or 5 years? No? This isn't the loan for you.

Today's bad idea is the "pick a payment" loan. You get 3 or 4 different amounts you can pay each month. One covers the entire principal and interest, one for only the interest, one for somewhere inbetween those and maybe one for less than the interest. Wow...I'm a little tight this month, so I'll just pay the lowest amount. What happens to the part you didn't pay? It goes back into the principal. People are going to end up owing more than they borrowed. If you do it one time, ok, but if you consistently make the minimum payment you never get it paid off!

As for regulations, we are regulated out the wazoo. There's so much regulation, nobody even understands it. There are companies that exist just to keep us updated on the regulations. Every state is different, and each state regulates against predatory lending practices. They don't all agree what constitutes predatory lending, but they all regulate it.

This lecture is almost over. Sorry about that...yes, there are lenders who are shady, but the consumer has to take responsibility for his actions too. Who is going to take care of you if you don't take care of yourself? Nobody.

Answer 3

There are strict disclosure laws that require that lenders disclose everything the buyers including explaining ARMs and payments, etc. Buyers are aware of these things when they sign their paperwork at closing. At that point they are so excited to be getting a new home that they don't even consider the consequences of their loan. I'm not saying the lenders are not at fault, but the buyers need to take some of the blame as well.

Answer 4

that is so true, but its because they can get away with it legally - that is what all those fine print disclosure statements say - we can screw you.
There are more lawyers on their side than ours. and there are lobbyists securing our gov't to back them.
Just keep a bag of chocolate kisses and a jar of petroleum jelly close by.

Answer 5

not just the Lending, but Cars, Banks, just about everything in this world are greedy..Its all about corporate profits nothing else matters

Answer 6

Where there is a way to make money people are going to take advantage of it. PERIOD. Money talks that is the way it is.

Answer 7

because no one regulates them

Answer 8

koran