Who’s to blame for the subprime loan crisis?
Do you even need to read this story to know?
According to CNN/Money, the list of usual suspects include lenders, mortgage brokers, Wall Street, federal regulators.
They also blame:
Appraisers: My opinion? Can you really blame them? Here’s what used to happen. A seller would put a property up for sale at a ridiculous price. A buyer would want to buy it, anyway. The appraiser would come in and say, well, it’s not worth what you’re willing to pay! The buyer would say, but I want it! Let me borrow the money, I don’t care. If you don’t appraise it out, I’ll go somewhere else!
I don’t know if appraisers ended up fudging the numbers or what, but somehow they made them work. Again, buyers wanted the numbers to work. Sellers wanted the numbers to work. Everyone was happy, then.
Now, not so much.
Real estate agents: Of course! We’re like magicians, I guess.
“I’m frustrated that real estate agents have gotten off scot-free,” says Shana Smith, president of the National Fair Housing Alliance.
According to Smith, agents encourage consumers to buy much more house than they can afford and the agents show them how to do it through the use of exotic mortgage products like hybrid ARMs, interest-only and negative-amortization loans.
Real estate agents are salespeople and, just like any salespeople, it is in their best interest to move up their customers into a bigger, more expensive product.
Real estate salespeople are not always scrupulous about fulfilling their fiduciary responsibilities to their clients. They sometimes persuade consumers to overspend and take on mortgage payments that may ultimately be unaffordable.
I don’t know. I can only speak from personal experience. I can tell you, I have had maybe three conversations in my life about mortgage loan products, with clients. The topic just doesn’t come up. By the time a buyer comes to me, he or she is already pre-approved for a loan. He or she already has a budget in mind. He or she says, “Let’s see things just in my price range, okay?” End of story.
I guess things must be different in other parts of the country.
Borrowers: The original CNN/Money story didn’t include borrowers as responsible for any of the crisis.
That we did not devote a full page to borrowers rightfully provoked much comment from readers. They charge that those now in trouble were trying to get something (a nice home) for nothing (no saving for a down payment, no worrying about monthly payments).
Subprime blame game – By Les Christie, CNN/Money