Who do you blame for the sub-prime mortgage crisis?

Question

Who is the most to blame for the sub-prime mortgage crisis in America? Do you blame the predatary lenders, irresponsible borrowers, bad economy in certain places, or people who borrowed with anticipation that there home would double in 3 -5 years (Phoenix, Las Vegas are two examples)

Answer 1

I blame the credit card companies. There is this mentality that people get into debt, it is their fault. Although that is true, who is regulating the credit card companies who take your interest rate from 12% to 30% when you have a 700 credit score, just because you are one minute late (literally) with your payment, and you have always paid on time?? How is THAT not predatory lending in and of itself? Credit card companies rule the world, which makes the ending of the movie "The Fight Club" my favorite of all time. If you have not seen it, go now!

Answer 2

There's enough blame to go around. Some is irresponsible borrowers who insisted on buying a home that was at the absolute upper limit of what they could be approved for, maybe with an ARM but no way to pay the increased payments.

In some cases it's the economy - someone is doing OK, then a layoff cuts their income drastically.

I think that much of the blame should be placed on predatory brokers or lenders who not only allowed but encouraged people to get in over their heads, soft-pedalling the consequences and the explanation of ARM's or other mortgages with low rates to start, but payments increasing a lot a few years down the road.

Add to your list the realtors who try hard to sell up. That's nothing new, and obviously they make a bigger commission on the sale of a more expensive house. Way back in the 70's when we were house-shopping, we had set a range for houses to look at, and every one of the 5 realtors we talked to said "but with your incomes you can afford more than that" and looked at us like we were crazy when we said but we didn't think we needed to. We did buy a house in that range by the way, and still live in it 34 years later.

And I don't know what michaelp is smoking, but when the mortgage market hit the skids, rates were close to the lowest that had been seen in a very long time.

Answer 3

There's enough blame to go around. The lending institutions are to blame for not caring about the security of loans because they knew they were going to sell them off, so defaults wouldn't be -their- problem. The borrowers are to blame for borrowing more than they should have, expecting property values to rise so fast that even if they couldn't pay off the mortgages they could make a profit by selling off the property. The government is to blame for deregulating the lending industry, especially when they can see that EVERY time they've done that it's led to this kind of situation. And our entire system of American-style Capitalism is at fault for putting the highest priority on short-term return on investment and being totally unable to look ahead more than a few months.

And just as the blame is spread around, the loss is also spread around. Lenders, investors and borrowers all lost, also the nation at large--the taxpayers get it in the shorts every time. Whenever voters swallow the neo-conservative idea that regulation is -evil-, they deregulate, and then they learn the reason we had regulation in the first place.

Answer 4

I am a loan officer with a mortgage broker. And I blame the credit bureaus who make it SO easy to report to a credit report. I blame irresponsible borrowers who claim they DIDN'T know their mortgage is adjusting. I blame the bad economy and the people who borrowed with anticipation that their home would double in 3-5 years (most of the time this is mortgage fraud.) So, I blame mortgage fraud too!

Answer 5

First, I blame the borrowers. I used to underwrite these loans and people CONSTANTLY did debt consolidation loan, after consolidation loan and would turn around and run back up their credit cards...that only goes on for so long.

Second, I blame the gov't...for making the "disclosures" so complicated that most Loan Officers that work in the industry don't know what they are or even how to explain them.

I used to roll my eyes when I would see some idiot LO tell a borrower that the APR was a "meaningless figure"....it's the 2nd most important figure in your entire loan package.

Third, I blame the states for not having enough laws in place to take predatory lending seriously, and actually PROSECUTE brokers and LO's that lie to borrowers just to get them to sign.

Answer 6

The economy. I don't think ANY of the other suspects would matter if the economy were still rolling along, but corporations think short term/self-interest/financial gain. Lenders, investment firms, politicians [who oversee regulatory agencies] and Wall Street all benefitted. It was driven by money--follow the money--it didn't stop with loan officers or mortgage brokers, did it? Yeah, keep outsourcing and encouraging this 'global economy' thinking--which destroys the middle class but is great for businesses-- and see where we wind up!

Answer 7

Ultimately I blame the people who voluntarily signed their name on the dotted line without enough knowledge about what they were getting in to. If any of them had read the documents and asked a few simple questions I am guessing the vast majority of them would have walked away.

I have friends and relatives alike who are about to lose their homes. Homes they could not afford, but managed to "get into". Now they can't afford the payments and they can't re-fi and they can't sell.

Answer 8

there's more than enough blame to spread around equally, a couple of years ago it would have been heresy to say the word "BUBBLE" but that's exactly what we have. lots of people blame Greenspan for starting the whole thing by driving interest rates down to ridiculously low levels for quite some time, creating a credit bubble.

Answer 9

Almost everyone has some culpability. Cuomo was head of HUD and certainly is part of it. the Franks/Dodd bill was part of it, The lenders were part of it, the mortgage brokers the banks and ultimately people who signed mortages that they could not afford.

Answer 10

I think it's Government for raising lending rates 17 times in 8 years. That created a sub-prime market, of everyone under cutting everyone and could not guaranty the loans.