Don't blame banks, brokers or lenders

I know it sucks but there's really nobody to pin it on. Unfortunately, current market conditions are the result of false stimulation of the economy through lowering rates. Why is lowering rates so important? Because propery values have " appeared" to appreciate at a ridiculous rate over the last 10 years.

In other words, a lower loan amount with a higher rate is mathematically equal to a higher loan amount at a lower rate. The difference is gain in equity. The problem therein occurs with cashing out of equity and reinvesting this " false income" (passive, and non-taxable with the right CPA) is controlled by inexperienced investors. How many investors were geniuses when the market was good yet are " victims" now that the market is bad?

Moreover, the rules of the game have changed but only the real players adapt.

Edited: 06/26/2010 at 04:50AM

Frank Adams

· Loveland, CO

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Mar 11 '08, 07:57 PM

I tend to agree with you but only in part.

I do blame " part" of the problem on " bedroom" (mortgage) brokers who helped, and in some cases " encouraged" loan applicants to falsify documents, particularly income statements.

I blame the " don't worry, be happy" , the market will take care of everything attitude of the Bush (and Bush Sr. and Reagan) administration toward any type of oversight of the mortgage business.

As we all learned in high school Civics class; people may be honest, but when an opportunity presents itself they will cheat. Hence the separation of powers in our Constitution. When people see that they can cheat with impunity, they will. AND DID.

all cash

Edited: 06/26/2010 at 04:51AM

Rich Rifkin

· Dublin, California

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Mar 11 '08, 11:21 PM

You touched on a very important subject for me - brokers who are " too" independent. When I first became licensed in Florida in 1990 I was proud to have passed a very difficult test and had a full background check (fingerprints, etc). In Florida back then to be a broker was much more regulated and prestigeous than to be a correspondent lender because they are exempt from reporting yield spread and service release premiums, plus they were exempt from Chapter 494 of the DBF.

When I opened offices in Colorado, however, there was no licensing for brokers so to be a lender was much more reputable. Colorado was one of 7 states that didn't require licensing at the time. I began public speaking on this matter and became a co-Chair of the Regulatory and Ethics committee. The example I used was that a person who was convicted of fraud, theft or dishonest dealings could start, run and operate a mortgage company from prison. That is the ultimat example of a " bedroom" broker.

I agree with you in blaming the gov't for non-regulation but then again, I don't want the gov't to over-regulate. The problem is, well, the government. The only reward for individuals who make decisions of this type is paid for in fundraising and other contributing compaigns. Ugh, it makes me sick.

Edited: 06/26/2010 at 04:51AM

Steve Funder

· Northern, California

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Mar 14 '08, 01:00 AM

There is no particular person to pin it on. There are many people who are to blame.
I completely agree with the interest rate/cash flow analysis (which means that if a person gets a 5% fixed 30 year direct am now, they can watch their property values fall in half, but if the rates go to 10%, the cash flows the same.)
This is an example of the decline of personal accountability in our society. Sure, if you have a credit score of 550 then you do not deserve a home loan; Plain and simple, but why are banks never to blame? Of all of the stuff that I've read about subprime, people never want to blame the banks. If the underwriting department of a bank has been writing loans against real estate for 75 years or whatever, why did they suddenly break all of their underwriting rules? You can't blame someone with a credit score of 550 for wanting to buy a house, but we should blame the banks for underwriting loans that they knew were high risk. Every time you go to a store and browse all of the useless garbage it's buyer beware; but the banks bought these loans and now they are sending our economy into a tailspin thanks to their panic knee jerk reaction to a problem that was largely their fault. I have no sympathy for people who mismanage their finances and suffer as a result, but I do not see enough personal accountability in this matter. Not from banks, from Wall Street, from buyers or from the Fed.
When I was a teenager, I had a job at a grocery store. My boss had a policy: If you cause a problem, you fix it. Maybe he should be the chairman of the Fed or the president.

Edited: 06/26/2010 at 04:51AM

Matt H

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Mar 17 '08, 08:19 PM

At the end of the day the only one responsible is you right.

Edited: 06/26/2010 at 04:53AM

Michael House

· Sunol, CA

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Mar 19 '08, 02:03 AM

True statement in many ways.

The fault falls on various people depending how you look at it, but in the end people were getting something for near nothing.

Ever heard the adage ..... if its too good to be true, it probably is.

Edited: 06/26/2010 at 04:53AM