Subprime borrowers: victim or perpetrator?

There is plenty of blame to go around. Ultimately, though, *you* are responsible for reading and understanding whatever agreements you choose to enter into, especially if it is the single largest financial commitment of your life. If you are too lazy to be bothered, then you deserve what you get. If you can't understand what you are signing, then don't sign it! (That's a shaky excuse anyway since mortgage agreements are not rocket science and don't take much brainpower to understand.)

I'm sorry, I feel a lot more contempt than pity for your "victims", Ms. Blanton. I cringe when I think about my tax dollars going to bail out the irresponsible and reckless.

Lenders were desperate for business and originated loans that did not make sense from an underwriting perspective. Borrowers were desperate to jump on the real estate road to riches, taking on more debt than they should have.

Ultimately, it is the borrowers who are to blame. They chose the loan; they knew they would be stretching to make payments.

The lenders made bad business decisions. The capital markets supported these decision by their willingness to take on the sub-prime loan risk and repackage loans into CDOs and to repackage the riskiest CDOs into more CDOs. The financial wiz-kids got the models wrongs and got crushed by the meltdown.

As a potential buyer who has remained on the sidelines for the last 18 months, watching this unfold has been education like no other. Lets be honest, no one group or person is to blame. There are so many factors that created this mess. Greed plays an enormous role just as much as ignorance. Unfortunately, home ownership is not a right but a responsibility. As Wall street encouraged lax lending standards which created great quarterly earnings, its clear the party is over. Many have lost their way once again.
Bailouts and finger pointing don't solve anything. Articles like you have provided show the public what's really going on. Something that many people can even fathom. At least not yet. This has a long way to play out with repercussions that will effect the good ole USA for several years to come. It will be ugly when payments come do and everyone will be affected in one way or another. As Steve Young so often says... "Time to Button up"

I put the blame on the borrowers, for the most part. I have a great job in a well-paying field and I am currently not a homeowner. It doesn't take a genius to look at the mortgage payments, figure out how much I earn per month and see that most homes in this area are out of my price range. It's sheer idiocy for a borrower to get themselves in that much debt, no matter what the lender says . My uncle, who's a real estate broker, gave me some sound advice when I started looking a while back: "They'll give you as much money as you want, and then they'll even offer you more. Just remember, at the end of the month, you're the only one writing the checks."

I don't believe in tax payer bailouts for the banks and these people. Why should the tax dollars of people that were smart and lived within their means go to support the fiscally irresponsible? It's a penalty for the rest of us. I feel for some of these people, but where do we draw the line between those that were conning the system and those that were conned? It's a slippery slope.

I think the best policy is to just let the whole thing ride out and let the housing market get back to the norm. Owning a house is a luxury in the Boston area. If you can't afford it, there are apartments everywhere, or there are jobs in other areas. There's really no argument that the market is going to correct itself, the way it has since people started investing in real estate in this country. Let the lenders and the borrowers both pay for their mistakes and everyone take this as a lesson learned in the future.

Neither- just thought that they had something that was too good to be true, and didn't stop to think about it.

I do hate to say this, but regulation is going to be required for the real estate business here at some point- things just got way too loopy, and that's not healthy for anyone.

The Appraisers in particular need to get a backbone, force their independence and stop over valuing houses.

When you make $50K a year and borrow $500K, there is only 1 person to blame and you see that person every time you look in the mirror.

In a frenzy there is usually ample blame all around, and that's the case here. By the way, the common denominator in each category noted below is GREED.

Buyers - Many lied, many used housing as speculation, many simply didn't do due dilligence on the biggest outlay of their lives, and many used their homes as ATMs;

Realtors - Their bottom line was to make a sale at the highest price. Truth was 'stretched' (charitably);

Appraisers - met the numbers to get their piece of the action;

Lenders - They knew they were selling toxic junk and simply didn't care;

Banks - As long as Wall Street would buy their packaged junk and they could make a profit they could care less.

Wall Street - The whiz kids who thought they'd figured out a way to make ever increasing profit out of housing prices. But their models never considered what happened when the cost of housing became so expensive the average person could no longer afford the average house... that's the point at which the bubble began to pop.

Ratings Firms - Hey, everything's AAA rated.

"Investors" - Foreign banks, pension plans, insurance companies, all of whom bought paper paying 12% on a stack of 6% mortgages.

I worked for a mortgage company in southern California. We were encouraged to offer loans that guaranteed a yield spread premium (2/28, 3/27) for the lender regardless of the clients inability to repay the loan after rate adjustments. The client was advised that the rate really did not matter because after a few months of appreciation the market offered them a chance to sell or refinance to draw out equity.
The responsibility I feel lays squarely on the lenders shoulders. Whatever happened to fiducial responsibility?

Honestly, there was a culture of "buy now, it's so cheap." As an agent, I tried to explain to buyers that an ARM (I never even discussed sub-prime) was nothing but a ticking time-bomb. Yes, most people move within 3-5 years in Boston, but a 3 or a 5 year ARM required people to move without any promise of sustained value in their investments.

Buying a house should not be easy. There is a reason why it's the most expensive purchase any of us will ever make. We sit and consult all sorts of food advisers, travel advisers, stock market advisers, etc... yet we think, "oh, a mortgage salesperson says I can put myself hundreds of thousands of dollars in debt, but I don't have to think twice about it."

The other HUGE problem is people shopping like they're on Orbitz for a mortgage. Yes, random website from who knows where can give me a loan for 4% but who the heck knows what that means for you down the road. It might cost a little more monthly to go with a large, well regulated, well known mortgage company, but guess what, that company is still in business.

Next time you delve into one of the homeowner sob stories, how about asking some relevant questions - Did you refi? If so, what did you use the money for? Did you read the documents you signed, especially the one page that lays out very clearly what the loan is and what it will cost? Did you make sure your application had correct information before you signed it? Did you do any research regarding real estate or loans? No one was forced to take loans or buy real estate. People chose to make at best ill informed decisions and now want to act like victims. They are even willing to publically say they were ignorant, greedy, irresponsible and now want someone else to pay for their mistakes.

I agree, as long as I've been in the real estate business, lenders have been willing to give borrowers more money than they need (perhaps this has stopped now, in the current lending climate?).

Every first-time homebuyer-client I've had (at least those who've borrowed), I've said to them, "The bank will give you more money than you want or need; decide how much you can really afford to pay each month, and borrow that much. The last thing you want to do is buy your first new home and end up broke at the end of every month."

Hopefully, they were smart enough to figure that out on their own, but it didn't hurt to give some friendly advice.

As Ken said, I put more blame on the borrower. The Lenders gave enough rope and the borroweres hung themselves.

The Lenders will take the loss on loans that were made that are not paid. The Borrower will lose their house if they do not pay their mortgage.

It is sad, but it is what happend when you sign your name to a legal document.

E.) All of the above.

The Fed made too much liquidity available, and continues to do so. Since 1980, we have gone from the greatest creditor nation, to the largest debtor nation. The "free" money isn't, and we'll be paying for it for the next 50 years. Economists have compared it to the fall of the Roman empire for similar reasons - it wasn't the end of the world, but it was far from painless if you happened to be Roman. It's so bad that David Walker of the GAO is screaming about the problem.

Those who got their hands on the cash first blew it on the stock market through 2000, then turned to housing. A bubble is a bubble. Like any other experience, if you don't know what you're doing, more than likely, you will make a mistake. The bigger the game, the more you stand to lose.

The banks and brokers, in both cases, were facilitiators to the process. Like the buyers, they made their investments. Now they need to deal with the results.

The American people are responsible, for letting it happen. A market is defined by two people agreeing on a price for a product. When a whole lot of people get greedy, they make a bubble. Bubbles pop.

Our creditors - Japan, China, the EU, and others, are responsible for throwing more money at us. They need to stop, or they will suffer the same losses we are.

The markets have to fall, the economy needs to recess, and the books need to be rebalanced. There is no better regulation for an industry than a lot of people losing a lot of money. The more money lost, the more likely the issue won't arise again for a generation or two.

Let Darwinism reign.

All I have to say is this: if these "victims' " homes hadn't gone down in price, would they be sharing the profits with the rest of us? Yet, they want us to take the hit for their irresponsible decisions. Nice.

Many patted themselves on the back for their financial acumen by buying homes while prices were skyrocketing. Now, they're saying they were victimized by predatory lenders.

You can't have it both ways, people.

In my opinion, the buyers were taking advantage of a good deal. The banks are the ones that really bought all this property and drove the prices up out of the reach of legitimate buyers. Just look at the median income, vs the price of homes and you see there's a problem. Property could not have been trading for those prices because no one could really afford them. Only with the creative financing pushed by banks. I had to take my phone off the hook to avoid their calls, the banks are criminal, plain and simple.

Rampant speculation fueled this rash of fraud and misrepresentation. Borrowers who abused the system were the real culprits, lenders had a secondary responsibility. Naturally the pig who gets caught squeals the loudest. Very few of these "victims" have clean hands.

they are the perpetrators, It makes me sick that Deval Patrick and Martha Coakley are treating them as victims. We the taxpayers are the real victims because those two are using state taxpayer's money and resources to bailout these irresponsible borrowers. We need to band together, create some organization to yell as just as loud and drown out the squealing these fraudulent lenders/borrowers are making.
If we don't we the responsible taxpayers will suffer for it.

Everyone should check out www.bostonbubble.com and register there. Lets disscuss about what we can do to create enough noise so that our govenor will think twice about making us pay for these criminals

they are the perpetrators, It makes me sick that Deval Patrick and Martha Coakley are treating them as victims. We the taxpayers are the real victims because those two are using state taxpayer's money and resources to bailout these irresponsible borrowers. We need to band together, create some organization to yell as just as loud and drown out the squealing these fraudulent lenders/borrowers are making.
If we don't we the responsible taxpayers will suffer for it.

Everyone should check out www.bostonbubble.com and register there. Lets discuss about what we can do to create enough noise so that our governor will think twice about making us pay for these criminals

Lenders may have made loans to people that couldn't afford it or maybe didn't fully understand them, but when do people start taking responsibility for their own actions? I was a first time buyer last year. I figured out what I could spend and got an approval for that amount and bought for that amount. I personally chose a fixed rate because I wanted the security of fixed payments, regardless of the fact that I will likely sell the condo and buy a house in 5-7 years. I don't think taxpayer dollars should absolve borrowers of making purchases they couldn't afford, but a rash of foreclosures does nothing but hurt everyone, including people who make their payments, by dragging down neighborhoods and prices.

Imagine going into a doctors office and hearing his/her diagnosis and treatment. Because the patient is not a licensed physician they submit to the professional licensed by the Medical Board.

Imagine you are a working class family and you sit with a "mortgage professional" licensed in the State wearing fancy new clothes and with a fancy new car. Why can't that family trust that their State doesn't put into place reasonable parameters for this licensed professional to operate within. For example, why require a drivers license if you have no rule of the road?

What was missing was a professional standard. Many folks trusted that their State wouldn't allow them to be preyed upon like they were.

A sound financial structure would have had a foundation of risk and the persons underwriting the loans should have have been on the hook to some degree i.e. they lose their license to practice in the State if a certain percentage of defaults come from their loans.

The press should push to find out who is accountable, and if nobody is currently, how on earth could the most important and common asset (housing) be so unregulated.

Ultimately, the responsibility rests with the individual borrower. While lenders may have been deceptive, the borrowers need to be held accountable for their decisions. If people would have exercised their due diligence and understood the terms of their loans, we wouldn't have nearly the mess we have today.
You can't blame a lender for the stupidity of a borrower.