Wednesday, October 29, 2008

A Comment About the Mortgage "Crisis"

I've been listening to people from all sides of the arguments (note the plural) regarding the "root cause" aspects of the rising foreclosures, "illiquidity" of mortgage assets and mortgage/equity loans, yada yada yada.  One thing that I'm really tired of hearing is the bullshit about it all being the fault of borrowers.  Bullshit!

Think of it this way:  If someone you don't know, at all, walked up to you and asked for $100,000, and you handed it to them, and they never paid you back, who's fault would that be?  Yours!  If you control the money, and you decide what to do with it (loan it out or keep it), then it's your job to be cautious and check out the probability that this unknown person could (or would) repay you.  Loaning to friends and family doesn't even count, because those are people you have personal experiences with and can make a judgement based on past experience.  Strangers are what I'm talking about.  Even if borrowers walked in literally begging for "too much" money, it's the lenders job to appraise the property, to research liens and past defaults, credit ratings, verify income, etc.  In most cases those lenders were so hungry for revenue quotas that they cut corners.  That's it.  Pure and simple.  They got sloppy and they lost their ass as a result.

However, it's not even that pure and simple.  They aren't going to lose their asses it turns out.  They're getting bailed out.  While we are left holding the bill and getting nothing garanteed, they're getting bailed out.  And they're STILL blowing the bail-out money on bogus crap and lavish treats, before taking a lump sum to bail out and run to some tropical retirement villa.  There is yet to be a plan put in action to prevent that.  So far it's all lip service.  We're getting screwed and they're pointing fingers at home owners as causing it by not paying their monthly payments.  Nobody seems to care either.  Everyone just watches their TV and tunes out the sneaky crooks at work burning our tax money.

It doesn't even matter whether you vote Democrat or Republican either.  Both buttholes are going to do nothing because the problem is bigger than they are.  It's just going to have to work its own way out and it will take time.  I know that from my own experiences that we didn't overborrow, but we sure had to turn down a major level of marketing pressure from mortgage lenders trying to get us to refinance repeatedly from 2002 to 2006.  I would say that between 2004 and 2005 we were getting 3 or 4 offers in the mail every single day and at least 4 or 5 phone calls per week begging us to refinance.   I'm sure there's plenty of borrowers who deserve blame for foreclosures, but the big problem overall is not that simple and it starts with the lenders.  They should have been more careful and done their homework.  I don't buy that bullshit story that it's all borrowers.  That's pure BS.
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