Right there on the front page of CNNMoney.com's website, "Subprime blame game. Some 2.4 million homeowners are in danger of losing their homes. Critics are pointing their fingers at who is responsible - here are the main targets." Curious, I clicked. Here is what I found.
- Mortgage Brokers. Sure, this one was obvious. They're taking a lot of heat over selling loans in which the borrower had little realistic chance at keeping up with.
- Appraisers. Okay. I have heard stories of appraisers "meeting a number" set by a realtor or mortgage broker. Obviously, if this sort of thing is going on, they need to take some responsibility for this mess.
- Regulators. Asleep at the switch? No question, but I really don't think anyone wants Congress to step in and say, "hold on there pal, we don't think you can afford this loan."
- Lenders. Whaaat? How dare you blame the lenders! Let's be honest. What else is going to happen when lending standards are eliminated almost entirely.
- Wall Street. Wall Street enabled the purchase of Billions in CDOs. This money became the lifeblood to subprime lenders across the country.
- Real estate agents. Every conversation that I have with realtors contains this sentence, "Let me show you how you can afford $xxx (larger than the number that I stated)." Yea, they belong on this list.
Not a bad list. So, why do I say that they got it all wrong? One question. Where are buyers/borrowers on this list? Do they get none of the blame? You make $50,000 and buy a $450,000 condo because your realtor and mortgage broker tell you that they can "get you in with nothing down, and after it goes up you can refinance"? Shouldn't we expect the borrower to have a "wait a minute" moment?
Or in the case of subprime refis. You bought a house in 2003 for $375,000, and a mortgage broker tells you that it's probably worth $500,000, and wouldn't you like to pull that equity out? You only make $65,000, and your credit isn't very good, but jeez, I could sure use a hundred twenty five grand! Let's see. I can pay off our credit cards and car loans. We can remodel the kitchen. And we'll still have enough to buy that boat we wanted! Sweet!