How much of the foreclosure crisis is due to economic pressures and how much due to lender abuses?

Question

NO one seems to be talking about the real cause of the record breaking foreclosures ....instead it seems a convenient sacrificial lamb has been found in blaming it all on unscrupulous lending.

http://news.yahoo.com/s/ap/20071115/ap_on_go_co/congress_risky_mortgages

Of course this is good for politicians to do so, as it detracts the public from talking more about the things they have done ( or not done) in recent years that have led us to where we are today.

tallmad you are not looking at the picture. You are only looking from your view point. Clearly something is broken with our system of doing things if so many foreclosures are happening. Sure you can lay some blame on people wanting more house than they can afford and getting trapped in a dangerous loan...which they signed with eyes wide open. But why are so many people's credit so bad that they can only get a highinterest subprime loan, why are credit scores below a certain amount automatically given a high interest or subprime loan? Why do so many americans have bad credit? why are so many foreclosure happening because of unforeseen finacial catastrophe like job loss, or bankruptcy etc...why are so many americans struggling, why are housing prices so high..what actions of government has contributed to this problem? What I am saying is there is a whole lot involved here and while some of what you say is true...its the only thing going on here.

tallmad you are not looking at the picture. You are only looking from your view point. Clearly something is broken with our system of doing things if so many foreclosures are happening. Sure you can lay some blame on people wanting more house than they can afford and getting trapped in a dangerous loan...which they signed with eyes wide open. But why are so many people's credit so bad that they can only get a highinterest subprime loan, why are credit scores below a certain amount automatically given a high interest or subprime loan? Why do so many americans have bad credit? why are so many foreclosure happening because of unforeseen finacial catastrophe like job loss, or bankruptcy etc...why are so many americans struggling, why are housing prices so high..what actions of government has contributed to this problem? What I am saying is there is a whole lot involved here and while some of what you say is true...its the only thing going on here.

..its NOT the only thing going on here.

Answer 1

I agree that the buyers have as much to blame as the lenders.
When buyers sign and agree to the contract with out reading it, because they want instant gratification of owning a home, and don't want to face the fact that their income may not grow as rapidly as the interest payments.
The individual loan officers are to blame for being greedy, they made their commissions, and many have been able to retire, leaving the leading company and the buyers in crisis.
The company is to blame for not providing sufficient staff to audit loan applications and their Cf's fell to provide realist growth projections and reserves for failed loans.
In may opinion the greed of the loan officers (originators) hold the biggest portion of the blame.
I may be bias, because I have a nephew that went to prison when he was just 18 for robbing the ATM at the bank he worked. Two years after he got out of prison he got a job working as a loan officer at a major bank (managed to get his record exsponged). He has made a fortune in home loans; often altering loan applications, so buyers would qualify for the loans.
The government should not bail out any of them.

Answer 2

There is too much evidence of lending irregularities to blame it all on the victims.

""Six brave women who worked for one of the nation's
largest sub-prime home mortgage lenders, Lehman Brothers subsidiary BNC Mortgage Inc., spoke out about fraudulent mortgage lending practices, and were viciously harassed for their trouble.
In a September 26, 2007 ruling by California's Third Appellate District, these employees of BNC Mortgage, Inc., who were forced to resign after reporting fraudulent mortgage lending practices, have won the right to sue the company in court and have their cases heard by a jury.""

Answer 3

TALLMADG: I agree with everything you said. However you didn't go far enough.
The financial institutions are as much to blame. They allowed borrowers with bad credit to piggy back on those that have got good credit,to bolster there credit ratings.

Unfortunatly the government may help the enablers out financially,and burn the borrowers.

Answer 4

I am sorry - but - the foreclosure crisis can only be blamed on the people who took out the loans. What UNREALISTIC goals did they set for themselves? AND I hope that our government, MY TAXES DO NOT help them out. Sorry - but - I BUDGET my paycheck, I KNOW how to save, I KNOW how much things COST, I know how to ANTICIPATE expenses. If I want something and I don't have enough money for it - I DON'T GET IT - SIMPLE ENOUGH!

Okay - I'm done ranting...now back to your regularly scheduled programming.