Credit Crisis the Fault of Home Buyers?

[Flabbergasted]

A right wing friend of mine, when discussing the economy, pointed out that it was the fault of home buyers who could not afford their loans, for the credit crisis.

This is a right wing talking point for the credit crisis and was used by Bush during his speech when he offered tax advantages which would help some people stave off foreclosure.

Is this a valid argument?

Why or Why not?

[liberal N proud]

1. They should have been more aware of their own finances BUT...

Many of these people were preyed upon by the lenders and enticed into taking loans they couldn't afford. Many were swayed into buying homes much more expensive than they needed and really couldn't afford. Why by a Civic when you can by an Acura syndrome

[DaveJ]

6. Preyed upon, and scammed

Sure, if they had financial managers to assist them, they might not have mad the mistakes. But how many people have their own personal accountants? People were led to think that these loan officers could be trusted, apparently, not thinking that now it's getting to the point that it is almost impossible to find anyone who you can trust.

Yes, they made a mistake but it's immoral and unethical to run a business that preys on people who make mistakes.

[AndyTiedye]

23. Out Here in CA, Most Got In Pretty Deep Just to Afford Any Home At All

Our home is paid for now, but 15 years ago when we moved here, we had to engage in every kind of voodoo economics to afford it, and the prices were much lower then.

[YOY]

2. It's that "personal accountability" bs they bring up all the time

Yeah sure, it works fine in judging a bank robber, but telling the guy who got hit by a car when he was crossing the street that he forefeited his medical care because he refuses to take accountability.

Doesn't work in this situation either.

[TechBear_Seattle]

3. I think buyers share some responsibility, but not the largest part

When I looked at getting a house several years ago, I saw that the loose credit was a bad idea. I would think that with basic due diligence and a modicum of common sense on the part of a buyer, they would have seen that the terms of the loan contract were shakey at best. So I can not hold the buyers completely faultless.

That said, however, I think the lion's share of blame lies with the lenders. They pushed bad loans and took on risky clients who had no business getting mortgages in the first place. More to the point: They should have known better. Rather than looking out in the long term, they chose to make as much money as quickly as they could, and have not only fallen flat on their faces but dragged down an already shakey national economy down with them.

[Iris]

21. I agree with you on both parts. I think a combination of factors created a climate

in which people thought they had to buy just to get into the market. Like if they didn't buy a house when they were 20- or early 30-something, they would NEVER be able to "get into the market" (a phrase I've hard on more than one of those buying a home shows so popular on cable.) Add in the smooth-talking mortgage brokers and lenders who would quickly dispel any qualms with "No downpayment? That's ok, we can put a 2nd mortgage on at the same time you take out your first..." Well, I'm sure plenty of people found it hard to resist.

I can't tell you the amount of ostracizing I was subjected to because my husband and I refused to play the game. I'd call lenders and hang up almost as soon as I heard the words "no problem" come over the line. Sadly, my family was the worst. They acted like we were total losers for jumping in and buying a house we really couldn't afford. No matter that some of my siblings, cousins, and the kids of my parents friends who had bought houses were no better of than we were.

Fortunately, we waited until we could afford to buy a home with a traditional mortgage and are very happy we did.

[Zenlitened]

4. Ask him to tell you all he knows about derivatives...

.. risky loans sliced and diced, mixed in with other loans like so much hamburger, and served up all around the world as something yummy and good and practically risk-free! :eyes:

Then ask him what these imaginary products are worth. If he knows, he really ought to tell the big banks and the hedge-fund folks. Because they have no idea. That's why the whole financial system froze up, and they're still trying to thaw the pipe without breaking it.

[Hosnon]

5. Other: It was one major factor among many.

Financial responsibility should be encouraged but when a market is abusive, as it was here, regulation should be increased.

[Demit]

7. If you had had an option for equal culpability, between con men & marks, I would've picked that.

Home buyers let themselves be gulled. They forgot the old adage 'if it sounds too good to be true it probably is.' You've got to consider worst case scenarios when you make money decisions, or else you'll get taken by flim-flam men. That's not new. It's a damn shame, but you can't go through life buying things if you can afford them only if everything goes exactly right.

[TexasBushwhacker]

8. 2 Major factors are more important

1) The existence of mortgage companies that are not regulated like banks and savings and loans are. They are the ones that grant the risky subprime loans. This is especially a problem if they require little or no downpayment.

2) Falling home prices in some markets. Many people take subprime loans with the intention of refinancing when they get their credit in shape. That works fine as long as the value of their home is going up. If it goes down, they owe more on the home than they can get a new loan for. So their ARM payments go up, the value of the house goes down, and the homeowners decide to walk, and who can blame them?

[LSK]

9. wasnt Bush and the right promoting the Ownership Society a few years ago

:eyes:

[aikoaiko]

10. Home buyers were a major factor and so were the mort. co.

I was there in 2003 about to buy my first home. With pretty big college loan debt and some credit card debt, I did not have a great credit rating. My choice was to get an ARM and buy a bigger house, or get a 30 year fixed and a smaller home. I decided on stability and living within my means.

Buyers and lenders both made bad decisions.

[BlooInBloo]

11. Irresponsible borrowers borrowing from irresponsible lenders lending....

... I blame the borrowers more, simply because the lenders had reason to believe the govt would bail them out (govt commonly bails out big business). The borrowers had no reason to believe anything of the sort - hence their irresponsibility is somewhat greater, in my estimation.

But this is DU, so nothing is ever the individual person's fault - rock on.

[slackmaster]

12. Calling something a "right wing talking point" doesn't completely invalidate it

It's true that a lot of people bought houses that they could forseeably not afford.

That is not the only factor, but it is true. Trying to attribute a complex situation to a single root cause is kind of pointless.

[LynneSin]

13. here's my 2 cents and you might not like it

I think both the creditors and the creditees are to blame.

Sure - the mortgage companies were giving out mortgages to people who were clearly not qualified to have a home mortgage especially to people who had proven histories of credit repayment problems.

But to turn things around the home-buyers were taking advantage of these available monies and buying way over their limit.

I was told I could get a house up to $250k but I knew that I would be stretching myself thin if I bought something that highly priced.

It's easy to blame the mortgage companies but we as consumers need to take some responsiblities too.

Subprime has good merits and bad. I would have never qualified for this house if it wasn't a company taking a chance with me with a crappy little subprime credit card. But I utilized that card in order to build my credit to what it is today.

[MrCoffee]

14. what's not to like about that?

i don't like it because you said it instead of me. other than that, sounds pretty accurate.

[LynneSin]

15. Well, this is GD and too many people just assume it's the credit companies

As someone who not only works for that industry but has also been irresponsible with credit - I believe we are both to blame.

[BlooInBloo]

26. This is DU. The people are NEVER to blame for ANYTHING bad....

Bad elected officials? Vote was stolen. Not the people's fault.

Mortgage crisis? Lenders forced borrowers at gunpoint to sign fraudulent documents. Not the people's fault.

I could go on, but it would only piss more DUers off - something I try like the dickens to avoid.

[LynneSin]

29. I find pissing off DUers to almost be a sport

How many can I piss off in one day

The bankerupcy bill is very flawed and the repukes did some last minute changes to the bill that made it even worse.

However, I do feel that people need to be responsible for the debt they incur ESPECIALLY when it was for something non-critical.

[BlooInBloo]

30. I myself work very hard to avoid ruffling any feathers on DU...

... The bankruptcy bill is a crock of shit that has nothing whatsoever to do with irresponsible borrowers. Significantly over 1/2 of the people affected by the bill are so affected because of a major medical catastrophe. Not even remotely close to the same thing as people borrowing for a house they can't afford.

[michreject]

16. Poor credit risk

ARM's and financing 125% of the value of the house. These elements, when combined, were a recipe for disaster.

[depakid]

17. The poll completely misses the point

Completely misses the larger picture.

If there were rational regulations in place- ones with real teeth, we wouldn't be in this mess in to begin with.

There's no sense in "blaming" one set of parties or another- it's basic human nature. It all boils down to unrestrained greed- and it's now adversely affecting a LOT of us who had nothing to do with the sorry situation.

Mortgage brokers will try to bait & switch- they'll do anything they can for their fees and commissions. Buyers will try to get a house- a larger house that it looks like they can afford (maybe) today, but hopefully tomorrow. Lenders will take their cut and package these "products" and sell them as securities for whatever profit they can get- after they're sold- it's "not their problem." Institutions and hedge funds will buy 'em up- hoping to make a killing and sell off before the shit hits the fan.

The Far right and the Clinton Dems had every reason to know how this process would play out- it's happened in similar instances many times before. Trouble is that they're ideologues- locked into free market fundamentalism and campaign contributions for the very same reason. Greed.

[BlooInBloo]

18. If it's bait & switch, then it's breach of contract. Is that what you're claiming?

[depakid]

19. What many of these mortgage brokers do is shuffle clients

to loans with higher rates and fees than they were entitled to (often times these are "hidden" in the sense that they're way down in the fine pint). Indeed, many companies actually had incentives and bonuses for brokers who did that.

Amending TIL to account for these sorts of new "products" would certainly have made that a lot harder.

As would criminal statues enforced by regulatory agencies.

Not sure if its "breach of contract" per se, not in the real estate market, but it certainly might fall under fraud or some other regulatory violation.

[BlooInBloo]

22. If the entire mortgage crisis is due to fraud, then there certainly should be an FBI...

... RICO investigation.

I had no idea there was evidence of such behavior. Thanks for letting me know.

[depakid]

24. There probably should be investigations!

And my bet is that there will be as more of these companies and individuals go into bankruptcy.

btw: Bait and Switch has been around for a while- it just got a lot easier to scam people as the varieties of these "products" got more complicated and expanded exponentially.

Check it out:

http://www.google.com/search?num=20&hl=en&safe=off&sa=X&oi=spell&resnum=0&ct=result&cd=1&q=mortgage+brokers+%22bait+and+switch%22&spell=1

[BlooInBloo]

25. lol!

[Mountainman]

20. I wonder if the lenders went out looking for customers? When ever I bought a house

I had to pre-qualify so I knew what price range I could get a lone on. It may have been that people went to buy a house and they were pre-qualified for more then they would have been in years past. That would be the fault of the lender I would think. But people are also told what the payments would be and that the payments would be going up when the rates are adjusted. If people took loans for more then they could afford it is their fault they can't pay. No one can force you to sign loan documents. And I think that the full disclosure laws are still in effect.

My guess is that people wanted homes so bad they did what was unwise to do. In the past lenders would not let them do it. It was more a case of buyer be ware.

[Javaman]

27. A little from column A a little from column B

I think the whole issue with the housing bust and now the credit crunch is two fold: ignorant buyers not reading the fine print and mortgage lenders knowing full well that the buyers won't read the fine print.

One begets the other.

When you have a whole section of society that so sucked into the fact that you must buy a home to be acceptable in society, many of those people won't worry about fine print, it's the end goal of americans fascination with immediate gratification. Be damn all rules, be damned all responsibility! We will worry about that later!

And that is exactly what the lenders worked to their advantage. yeah yeah, buyer beware, blah blah blah, but when you have a group think situation that was set up by wall street, ad firms, mass marketing, peer pressure, and a country that now bases any sort of wealth a person has by how many things they have accumulated or how big their home is or how obnoxious their train sized vehicle is, is there any wonder how things have turned out the way they have?

We have people making adult decisions with a 4 grade, "I want that!" mentality, which in turn are being guided through the process of modern day carpet baggers.

So who is at fault? The dumbed down population and the mortgage lenders schooled in the thought of, "a sucker is born everyday".

[Ganja Ninja]

28. The borrowers are only partly responsible.

The banks and the government made the loans and they have a responsibility to make sure those loans are sound before they approve them. I couldn't go out today and borrow a couple of million because nobody would approve the loan. If I could I'd take the money and run. That's why banks have loan officers. It's their responsibility to make sure any loan the bank makes can be repaid.

[Greyhound]

31. Not a significant factor. The entire "sub-prime" market was created

as a means to fuel unreasonable property valuations, excessive profiteering by land owners, and to cover up the declining economy. IOW, a scheme to shear the flock yet again.

[BlooInBloo]

32. Which the flock freely and willingly signed on to.

[Greyhound]

33. But, you left out the most important aspect, knowingly.

Your callus attitude toward the victims of this scheme implies an understanding that simply never existed.