Who’s to blame for the subprime meltdown?
by Mortgage Rates on Wednesday, October 6th, 2010 | 4 Comments
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The lenders are the ones who took the risk of lending money to people who cannot afford to repay the money. It is that simple.
I think you are absolutely right builders don’t really care because they get “All” their money as soon as your loan is approved (and there is probably a kickback to the loan officer for the approval) and I believe that it is a stratagem of the lending institutions that more or less protects their interests in the sense that it increases the chance that they may wind up with the property and make more money in less time. A $1000 monthly mortgage payment on a $110,000 mortgage is $12,000 a year and $360,000 in thirty years. That is $250,000 out of pocket expense for a loan. Most of the interest is paid in advance so “IF” a house is foreclosed on after ten years and the lender resells it then another steep interest collection so basically a bank can collect a lot more than $250,000 interest on a house if it keeps getting foreclosed. You will hear it said all the time that banks don’t want houses but I don’t really think that’s true because houses can be resold. People pay rent all the time so why not offer them a house at the cost of their monthly rental. Wealthy investors make fortunes owning banks. $250,000 X 1000 homes = $250,000,000 divided by 30years = over 8.3 million a year. Hey not bad! Capitalism (when exploited) rapes people and the sad part is people love it. If our leaders really cared about people they would just let people have houses at cost but the fact remains that our leaders are wealthy corporate minded individuals who all have very impressive personal portfolios while the people wallow in the quagmire of trillion dollar debt. What’s wrong with this picture. When are the people of the United States supposedly a Super Power going to stop becoming homeless. Why is there any such thing as homelessness in this country? It’s really a sad truth about America.
No one is to blame. It’s a result of a free-market economy. The system corrects itself. There was too much cheap money on the market, too many risky loans were made, and now the system is correcting the problem. The pendulum will always swing. In a few years, rates will come back down again.
As adults we need to be responsible for the choices we make and sometimes the wrong choice is made. A lot of people wanted more than could really afford but we live in a society that says you can have it all NOW. Sometimes you need to start small…get what you can afford, pay your dues, fix your mistakes, and move up as you go along in life. Ask someone about the cold water walkup that was their first place.