Do you believe that Mortgage Lenders caused the real estate so called "crisis?"?

Question

The interest rates are still great. (at one time they were 12%+.) The glut of inventory is caused by investors and buyers who didn't qualify or couldn't afford the houses they were buying, but were given financing anyway. The actual house sales are only down 10% generally, after 4 years of extreme growth. Why isn't it reported as it is in the media?

Some of the answerers blame real estate agents... they are not responsible for reporting of income, assets or appraisals. So please get your facts straight. Selling a house is not the same as financing it...Please!

Answer 1

This isn't reported in the media because it doesn't sell air time. Gloom and doom is what sells and makes us watch.

I believe there are several factors that caused the "crisis" - but the main component was naive lendees who qualified for huge loans they had no chance of being able to afford. They bought all the hype that they could just refinance their house at a fixed rate down the road and didn't take into account that housing values could not sustain indefinate year over year growth. And shame on the lenders for making those loans.

People making $9 at Target bought $400,000 houses, folks refinanced to have money to buy the boat and the Hummer - and now the repercussions of these poor decisions is coming to the forefront.

I predict there will be a line up of pasty faced, well dressed folks in front of a Senate committee attempting to explain how all this happened. And what can be done to rein in the mortgage industry.

Answer 2

If you,the consumer, enter into a loan agreement for thousands of dollars, without a COMPLETE understanding of the costs involved, then your greed and or ignorance is responsible for the situation in which you find yourself. I know that sounds harsh but the truth always is. It is up to you to know that if you budget yourself into a home investment within 15$ of your annual income that problems will arise. Living comfortably in a 300k home is infinitely better than sweating in your sleep in your nice 489k home. It's not brain surgery folks, just math. The lenders job is to lend, the realtors to sell, and the buyers to make certain that the home you purchase is one you can reasonably afford. Its not about keeping up with the joneses anymore folks. This wake up call is only an indicator of an underlying symptom of a buy now pay later mentality. OMG, was Dan Quayle right after all??!!

Answer 3

I blame the Government for not implementing strict laws on mortgage companies to regulate their lending practices. Lets face it, many people in the U.S. are not very good at making decisions about their finances and these people who signed these ridiculous interest only mortgages shoulder a lot of the blame as well. But our government is in charge with protecting the consumers in business, and they have not done their job as far as I can see.

I work in real estate in Michigan and there is no license law for mortgage bankers (only the broker they work under). This basically means ANYONE can get a job selling mortgages and if they do a bad job, the worst thing that can happen to them is they get fired, after which they can turn around and go work at another mortgage place. They need to regulate the mortgage industry the same way the regulate Real Estate Agents.

This would curb many of the idiots in the mortgage industry that do harm to their clients to make a few extra dollars.

Everyday I go on listing appointments where people cannot sell their home at the current market price because they owe more than their house is worth due to these ridiculous over-lending practices.

Just crazy.

Answer 4

There are two people at fault. 1) the lenders for giving people loans that they knew they couldn't afford. 2) Greedy people that knew they couldn't afford a house and still bought it.

Personally I don't have any pitty for either. Lenders were making bad business decisions knowing that the people would default on the loans as soon as the adjustable interest kicked in. And if I walk up to someone on the street and offered them a 4000 sqft house for $800 a month the first thing out their mouth would be "how many people died in the house" why would they not question it in the loan office.

Answer 5

I worked at a mortgage company for a while and I saw many deals that shouldn't have been done because people couldn't afford the homes. Many tricks you can do to help people buy a home. Now many of these deals have gone down the drain because the people couldn't afford the loans when the variable interest rates went up and their payments went up. so yes they have a lot to do with the problem.

Answer 6

The mortgage lenders are guilty by having the house appraisers give them number that are needed to put the deal together . In other words make sure the appraisal are higher .As well one of biggest mistake the mortgage companies have made is loaning money to those without a down payment . What's in it for the new home owner who can't afford the house as the interest does creep up to hang on to the house , if they can't make the payment they just turn the key in and lose absolutely nothing of their capital as they went in without a down payment , and fact most of the time the land transfer tax are usually rolled in to the total purchase price which in turns is pushing the real estate values higher . Another problem is refinancing of mortgages for personal debts .Personal loans and credit cards are withdrawn from the equity of the house to pay off their debts and most people get right back into debts within a short time . Their should more stringent rules for home buyer , as all of us are paying for bad debts of mortgage default in the form of higher interest . As for house sales being down and not reported , I am not sure where you are getting your information but its being reported in the area being affected .

Answer 7

Nope.
under educated buyers helped.
mass media helped - not every poor broke indebt working paycheck 2 paycheck person should have a house.
school systems with their lack of real world economics and math helped.
lots of chefs in this kitchen and now we'll all get top pay. Remember the Savings/Loan crash of the 80's?
mass media only reports negative to SELL adds.

Answer 8

Lenders alone did not cause this situation. They had willing partners in those who signed the mortgages which they offered. Those clowns who got in over their heads are just as responsible for what is happening as are the lenders who offered the financing to them.

Answer 9

They are partially responsible.

The biggest fator responsible....GREED. lenders, brokers, investors, homeowners.....buyers ..sellers.. investors in mortgage securities.
Blame goes all around.
A loan officer

Answer 10

i dont believe that its their fault only banks made it easy for people to get home loans knowing they may not be able to afford them and later having to deal with forclosure.