The mortgage crisis….is the individual to blame or is government?
by Mortgage Rates on Thursday, November 18th, 2010 | 17 Comments
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To answer your question;
The individual, most ARM’s are written with a grace period of two or three years to convert to a regular 30 year loan before payments increase. That means that people know when they sign the loan they have two years to clean their credit and get a better job, if they do not it is the individuals fault not the Governments. No we should not help them out.
It is the fault of the idiots that took out the loans, as for a bailout, no way in hell. Let them be homeless for awhile, maybe it will drive some common sense into them.
My guess is that if it wasn’t an election year these same people would have been left to deal with the consequences of signing a contract they either didn’t read or understand.
Individual… These people knew what they were going into when they signed that mortgage papers..
The Banks, they took advantage of people whose dream it was to own a home & didn’t realise what they were getting them selves in to. The government had nothing to do with this one.
I know here in Ohio several cities passed laws to prevent these loans…..the republican legislature then passed there own law saying that cities could not regulate it…so here in Ohio…..the loan practices would not have happened had the GOP not protected the profits of the mortgage companies
individuals are to blame for their personal loan mistakes. Companies are to blame for searching out individuals who are not capable of understanding their situation to the point where they can intelligently reject (predatory lending).
the government should not have anything to do with it aside from prosecuting predatory lending
Why did you leave out banks as an option?
Individuals are to blame for being stupid enough to ignore the obvious catches in the loans, and the loan institutions are to blame for being greedy enough to take advantage of peoples stupidity.
Everyone knows its the individuals fault, however there are serious ramifications that will affect us all if this is not addressed. The banks should also not be lending money that is unrecoverable, but that is just bad business…. not illegal or “predetory”.
no. the taxpayers should not have to foot the bill for ignorant people who get loans and dont know what they are getting into, or the banks who preyed on them. This is America, you have th right to PURSUE happiness and success, you dont have the right to BE happy, we must have personal responsibility in this country.
Caveat emptor
It would only be the governments fault if it was “Universal Home Buying” or some other non-sense. It’s the individuals fault plain and simple, yet some how down this path of socialism we are headed for, the government will bail these people out. Which means more money from me, the smart loan guy will have to pay. Which means the country will go more in debt, and libs will blame Bush for it. No crystal ball needed.
If somebody hands me a pistol, I don’t have to shoot myself with it, no matter how rosy the person who gave it to me makes it sound.
One of these days, people will learn to take responsibility for their own actions and decisions, but with a whole bunch of whiny “activists” come out of the woodwork to take the blame away from them and put it on someone or someTHING else, (in this case, the banks,) it will never happen.
You forgot to put “lending institutions” in your list of possible culprits. I mean, aren’t they supposed to make responsible decissions, follow our lending laws (and keep a certain amount of reserves) and generally not be wreckless as well?
From what I can tell, a possible bail out is not being considered for the people who took out the loans, but the lenders may get a government check.
Some faint memory about Neil Bush and his Savings & Loan business in the 1980s comes to mind here.
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Looked it up, so here it is in cut and paste form:
Bush was a member of the board of directors of Denver-based Silverado Savings and Loan during the 1980s’ larger Savings and Loan crisis. As his father was Vice President of the United States, his role in Silverado’s failure was a focal point of publicity. According to a piece in Salon, Silverado’s collapse cost taxpayers $1 billion.[2]
The US Office of Thrift Supervision investigated Silverado’s failure and determined that Bush had engaged in numerous “breaches of his fiduciary duties involving multiple conflicts of interest.” Although Bush was not indicted on criminal charges, a civil action was brought against him and the other Silverado directors by the Federal Deposit Insurance Corporation; it was eventually settled out of court, with Bush paying $50,000 as part of the settlement, as reported in the Style section of the Washington Post [3].
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A more modern note:
Beginning in late 2006, the U.S. subprime mortgage industry entered what many observers have begun to refer to as a meltdown. A steep rise in the rate of subprime mortgage foreclosures has caused more than 100 subprime mortgage lenders to fail or file for bankruptcy, most prominently New Century Financial Corporation, previously the nation’s second biggest subprime lender.[10] The failure of these companies has caused prices in the $6.5 trillion mortgage backed securities market to collapse, threatening broader impacts on the U.S. housing market and economy as a whole. The crisis is ongoing and has received considerable attention from the U.S. media and from lawmakers during the first half of 2007.[11][12]
However, the crisis has had far-reaching consequences across the world. Sub-prime debts were repackaged by banks and trading houses into attractive-looking investment vehicles and securities that were snapped up by banks, traders and hedge funds on the US, European and Asian markets. Thus when the crisis hit the subprime mortgage industry, those who bought into the market suddenly found their investments near-valueless. With market paranoia setting in, banks reined in their lending to each other and to business, leading to rising interest rates and difficulty in maintaining credit lines. As a result, ordinary, run-of-the-mill and healthy businesses across the world with no direct connection whatsoever to US sub-prime suddenly started facing difficulties or even folding due to the banks’ unwillingness to budge on credit lines.
Observers of the meltdown have cast blame widely. Some have highlighted the predatory practices of subprime lenders and the lack of effective government oversight.[13] Others have charged mortgage brokers with steering borrowers to unaffordable loans, appraisers with inflating housing values, and Wall Street investors with backing subprime mortgage securities without verifying the strength of the underlying loans. Borrowers have also been criticized for entering into loan agreements they could not meet.[14]
Many accounts of the crisis also highlight the role of falling home prices since 2005. As housing prices rose from 2000 to 2005, borrowers having difficulty meeting their payments were still building equity, thus making it easier for them to refinance or sell their homes. But as home prices have weakened in many parts of the country, these strategies have become less available to subprime borrowers.[15]
Several industry experts have suggested that the crisis may soon worsen. Lewis “Lewie” Ranieri, formerly of Salomon Brothers, considered the inventor of the mortgage-backed securities market in the 1970s, warned of the future impact of mortgage defaults: “This is the leading edge of the storm. … If you think this is bad, imagine what it’s going to be like in the middle of the crisis.”[16] Echoing these concerns, consumer rights attorney Irv Ackelsberg predicted in testimony to the U.S. Senate Banking Committee that five million foreclosures may occur over the next several years as interest rates on subprime mortgages issued in 2004 and 2005 reset from the initial, lower, fixed rate to the higher, floating adjustable rate or “adjustable rate mortgage”.[17] Other experts have raised concerns that the crisis may spread to the so-called Alternative-A (Alt-A) mortgage sector, which makes loans to borrowers with better credit than subprime borrowers at not quite prime rates.[18]
Some economists, including former Federal Reserve Board chairman Alan Greenspan, have expressed concerns that the subprime mortgage crisis will affect the housing industry and even the entire U.S. economy. In such a scenario, anticipated defaults on subprime mortgages and tighter lending standards could combine to drive down home values, making homeowners feel less wealthy and thus contributing to a gradual decline in spending that weakens the economy.[19]
Other economists, such as Edward Leamer, an economist with the UCLA Anderson Forecast, doubts home prices will fall dramatically because most owners won’t have to sell, but still predicts home values will remain flat or slightly depressed for the next three or four years.[20]
In the UK, some commentators have predicted that the UK housing market will in fact be largely unaffected by the US subprime crisis, and have classed it as a localised phenomenon.[21] However, in September 2007 Northern Rock, the UK’s fifth largest mortgage provider, had to seek emergency funding from the Bank of England, the UK’s central bank as a result of problems in international credit markets attributed to the sub-prime lending crisis.
As the crisis has unfolded and predictions about it strengthening have increased, some Democratic lawmakers, such as Senators Charles Schumer, Robert Menendez, and Sherrod Brown have suggested that the U.S. government should offer funding to help troubled borrowers avoid losing their homes.[22] Some economists criticize the proposed bailout, saying it could have the effect of causing more defaults or encouraging riskier lending.
On August 15, 2007, concerns about the subprime mortgage lending industry caused a sharp drop in stocks across the Nasdaq and Dow Jones, which affected almost all the stock markets worldwide. Record lows were observed in stock market prices across the Asian and European continents.[23] The U.S. market had recovered all those losses within 2 days.
Concern in late 2007 increased as the August market recovery was lost, in spite of the Fed cutting interest rates by half a point (0.5%) on September 18 and by a quarter point (0.25%) on October 31. Stocks are testing their lows of August now.
On December 6, 2007, President Bush announced a plan to voluntarily and temporarily freeze the mortgages of a limited number of mortgage debtors holding ARMs by the Hope Now Alliance. He also asked members Of Congress to: 1. Pass legislation to modernize the FHA. 2. Temporarily reform the tax code to help homeowners refinance during this time of housing market stress. 3. Pass funding to support mortgage counseling. 4. Pass legislation to reform Government Sponsored Enterprises (GSEs) like Freddie Mac and Fannie Mae.[24]
The government? No. They had very little role in this except…and I don’t recall the issue, but seem to recall that congress passed a regulation requiring lending companies to loosen their requirements for a loan.
The individual is, in part to blame. When ever you sign a deal, you have a responsibility to understand what you’re doing. But many folks don’t buy a home but once or twice in their lives. Or, for many, this was the first time. So…
The lending institution, folks who have the stats to back up a) who had good credit and b) what sort of scenarios have a high probability of default, I believe, bear the bulk of the blame. They were creating products that most first time home owners and many second time buyers didn’t really understand the ramifications of. These were organizations with the education and experience to know what they were doing and behaved irresponsibly for the sake of a buck. And their marketing, which in essence said, “Buy the home you want, not the one you can afford” and then created products to get buyers into those homes seem to be the ones who have shot themselves in the foot.
Fortunately, the mortgage crisis is more of a media made crisis than a real one. While foreclosures are high, they’re not that far out of the norm. But any crisis on a slow news day, huh?
knowing a few facts helps one to know, in February last year members of the financial empires in the u.s. were asked by a group of senators (Clinton leahy and a few others) to loosen up their loan requirements as they might be prejudicial to the poor, and some minorities, the financial leaders did and we now have the mentioned crisis, I refied lately but wasn’t one to get sucked into an adjustable interest rate loan by6 some Shylock, do I get a bonus for not causing the recession?
Republicans cannot win. If they had regulated the banks so that the poor, the uneducated, or the bad risk were unable to live the American dream they would have been blasted by the liberals. Can anyone else see the irony?
The liberals get there way in NY State on every issue, and the place is the highest taxed and has the highest poverty rates in the country. They still blame GW Bush for a system that’s been in place since the 1960′s.
Watch how silent they will be when food prices keep going up under the Democrats. They want ethanol, but not the price that goes with it. Maybe the Democrats will cap corn prices, but then they’ll have to increase subsidies to farmers. It never ends.