View Poll Results: Who deserves the blame for a loan default, the borrower or the lender?

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  • The borrower, they shouldn't be taking out a loan that they can't pay back

    32 62.75%
  • The lender, they shouldn't be making loans that they suspect will default

    11 21.57%
  • The government for guaranteeing the loan

    8 15.69%
  • The government for failing to adequately regulate the lending process

    8 15.69%
  • All of the above

    16 31.37%
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Thread: Who to blame: the lender or the borrower?

  1. #31
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    Re: Who to blame: the lender or the borrower?

    Quote Originally Posted by Cephus View Post
    I don't know that fault is a concern here, I'm more interested in whose responsibility it is. .... You took the loan, you signed the document, you either follow your agreement or you turn over the keys.
    So simple. Yup, those stupid people didn’t attend the classes on mortgages (There
    were so many types, some could be called punitive.) the economy (Studying the projections
    on what would happen when the bubble burst, and timing for the burst.) leading
    to the possible difficulty to do a refi. That way they wouldn’t have done what
    the experts at the loan companies and neighbors were telling them to do. I
    forget, was that a 3 semester hour class or a 4?

  2. #32
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    Re: Who to blame: the lender or the borrower?

    Quote Originally Posted by Rhapsody1447 View Post
    If a person defaults on a loan, who deserves the blame the lender or the borrower? As credit eases and lending standards go down, more and more loans are made to people with riskier credit histories. A lot of times this can lead to predatory lending practices (e.g. adjustable rate mortgages that reset at a much higher interest rate,Here, I took quite the hit.... banks pushing loans on people who can't afford them.......[COLOR="#FF0000"]Banks should not be allowed to advertise...[COLOR]), however sometimes it is necessary for the government to ease credit conditions in order to help spur economic growth.......THIS SHOULD NEVER HAVE HAPPENED, regulation should have pvevented this.. (e.g. by making it easier for people to buy a house or start a new business).
    An interesting thread which may lead to a solution of the problem..
    I am thinkig that adjustible rate mortgages should never have been......
    In todays world, its now necessary for a man to be a financial whiz, but few, including me ..are...
    Yes, singed by an adjustable rate and all the ensuing complexities, many pages of paperwork and small print....
    I'd say that every man needs a true financial advisor.....Had I placed pride where it belongs, I'd still be in Goldsboro, retired and rather wealthy.
    A man should know his place, I did not...

    So if I take out a loan and fail to repay it, is it my fault or the bank's?
    Both, but the banks should have known better......
    I 'd like to hear from a banker.....

  3. #33
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    Re: Who to blame: the lender or the borrower?

    Quote Originally Posted by OhIsee.Then View Post
    So simple. Yup, those stupid people didn’t attend the classes on mortgages (There
    were so many types, some could be called punitive.) the economy (Studying the projections
    on what would happen when the bubble burst, and timing for the burst.) leading
    to the possible difficulty to do a refi. That way they wouldn’t have done what
    the experts at the loan companies and neighbors were telling them to do. I
    forget, was that a 3 semester hour class or a 4?
    There were no classes that I know of back in the 60s, 70-80s....but, back then , the banks were very restrictive... so the "class" was one second long....the time it takes to say "NO"......
    We did get carried away with re-regulation.
    The "law" that should have been enacted is the one prohibiting small print and allowing lying by the big banks.....
    No, they do not lie, they hide the truth under a ton of paperwork.....which, IMO, is the same as lying.

  4. #34
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    Re: Who to blame: the lender or the borrower?

    Quote Originally Posted by earthworm View Post
    Both, but the banks should have known better......
    I 'd like to hear from a banker.....
    The problem is, the majority of the problem had nothing whatsoever to do with the banks, but with fly-by-night mortgage companies who existed solely to write a ton of loans that they could sell off to the banks in bundles, take their ill-gotten gains and fly off to some south seas island, sipping mai-tais. Where de-regulation failed is that it allowed banks to get involved in mortgages in the first place. Had the system remained regulated, mortgage companies may have failed, but we never would have had to bail out the banks in the first place.
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  5. #35
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    Re: Who to blame: the lender or the borrower?

    The Lender, the borrower, and the government for pushing the loans. Borrowers were taking out loans they could not afford. Lenders were giving out loans to risky clients that were in danger of default. The government was supporting all this and encouraging it. It was the regulation that tried to push it. The government, lenders, and borrowers are all at fault.
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    Re: Who to blame: the lender or the borrower?

    Quote Originally Posted by Cephus View Post
    The problem is, the majority of the problem had nothing whatsoever to do with the banks, but with fly-by-night mortgage companies who existed solely to write a ton of loans that they could sell off to the banks in bundles, take their ill-gotten gains and fly off to some south seas island, sipping mai-tais. Where de-regulation failed is that it allowed banks to get involved in mortgages in the first place. Had the system remained regulated, mortgage companies may have failed, but we never would have had to bail out the banks in the first place.
    Going to have to disagree. You blame "fly-by-night mortgage companies who existed soley to write tons of loans that they could sell off to the banks in bundles ...... ". Whoever wrote the loans does not matter. They wrote them because they could make money in writing them, and more importantly, they had the capital to write them, then sell them to banks that willingly bought them ! You call them "fly by night", but the banks bought their paper !! If they were so shady, what were the banks doing !!

    Fact is, it wasn't the work of "fly by night" lenders. That had essentially nothing to do with it. Everyone was writing loans, sub-prime and otherwise, because of the bubble, and the profit it generated. Fannie and Freddie ended up underwriting and guaranteeing half of all loans. There's your "fly by night" entities right there. When government is behind half the market, what message does it send to the rest ? "Can't go wrong" is the message, cause Uncle Sam has got your ass covered ! What Uncle Sam could not cover, and the reason we have a Recession, is cause people stopped spending. They stopped spending because 25% of them went underwater when the bubble popped. They stopped spending because those portfolios that were MBS's lost up tp half their value when the inflation bubble popped.

    If by some miracle the bubble inflated, and then just stayed at that level for a decade while the rest of society caught up, then there is no Recession. Regardless of who wrote the mortgages.
    Last edited by Eighty Deuce; 10-29-11 at 01:12 PM.

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    Re: Who to blame: the lender or the borrower?

    Quote Originally Posted by Eighty Deuce View Post
    Going to have to disagree. You blame "fly-by-night mortgage companies who existed soley to write tons of loans that they could sell off to the banks in bundles ...... ". Whoever wrote the loans does not matter. They wrote them because they could make money in writing them, and more importantly, they had the capital to write them, then sell them to banks that willingly bought them ! You call them "fly by night", but the banks bought their paper !! If they were so shady, what were the banks doing !!
    Of course they could make money by writing them, they didn't have to worry if any of them would ever be paid, they wrote them specifically for the purpose of selling them to other institutions who could then take the fall when the loans defaulted. The banks bought the paper because by the time they got it, it was chopped into so many pieces and bundled in such a way that there was no way to know which, if any, of the loans were good or bad. They weren't buying individual loans that they could conceivably examine and pick and choose, they were buying parts of thousands of loans, the paperwork for which may not have been available, or as we're finding out today, may not have even existed.

    Yeah, the banks blew it by buying those loans, but by the time the banks had anything to do with it, the loans already existed.
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  8. #38
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    Re: Who to blame: the lender or the borrower?

    Didn't a wise man once say "neither a borrower nor a lender be?"
    Liberté. Égalité. Fraternité.

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    Re: Who to blame: the lender or the borrower?

    Quote Originally Posted by Cephus View Post
    Of course they could make money by writing them, they didn't have to worry if any of them would ever be paid, they wrote them specifically for the purpose of selling them to other institutions who could then take the fall when the loans defaulted. The banks bought the paper because by the time they got it, it was chopped into so many pieces and bundled in such a way that there was no way to know which, if any, of the loans were good or bad. They weren't buying individual loans that they could conceivably examine and pick and choose, they were buying parts of thousands of loans, the paperwork for which may not have been available, or as we're finding out today, may not have even existed.

    Yeah, the banks blew it by buying those loans, but by the time the banks had anything to do with it, the loans already existed.
    Let me see if I understand you. Are you saying that the banks were ignorant to what they were buying ? That these bundles were so convoluted that the bank couldn't figure them out ?

    The banks knew exactly what they were buying. That they did not practice due-diligence was a CHOICE they made. The primary reason things were so loose was because there was so much money to be made off the bubble. So long as it inflated, risks were minimized. That's why all the seemingly crazy loans. Sub-primes. 110% loans. Point is, the bubble made all things possible.

    What we have is a major political party, the Democrat Party, invested in masking and confusing the truth about the Recession. "Blame Wall Street". "Blame Deregulation" .. while hiding the fact that the deregulation was the pet project of Robert Ruben. What the Democrats want confused, at all costs, is that the entire bubble was the creation of Fannie and Freddie shoving the market it ways it would have otherwise never gone.

    Whether we ever had MBS's or not is not what made it happen. You drop everyone's home value by 40% after a 10 year climb, and you got a major Recession regardless. Add to it bloated governments that rode that added revenue as well, and now cannot contract because they created a massive nanny-state, and behold a mess 100% of the government's doing.

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    Re: Who to blame: the lender or the borrower?

    Quote Originally Posted by Eighty Deuce View Post
    Let me see if I understand you. Are you saying that the banks were ignorant to what they were buying ? That these bundles were so convoluted that the bank couldn't figure them out ?
    In many cases, yes. They weren't buying individual mortgages, they were buying tiny slivers of tens of thousands of mortgages in a package. While I'm not going to argue that, in retrospect, they should have gone through each and every loan and verified it, but the fact remains that by the time the loans were up for sale, they were already made. The banks refusing to purchase these mortgage bundles wouldn't have changed that fact. The people were already in the houses and, for the most part, were paying their mortgages on time over the first year or so before the terms changed.

    The banks knew exactly what they were buying. That they did not practice due-diligence was a CHOICE they made. The primary reason things were so loose was because there was so much money to be made off the bubble. So long as it inflated, risks were minimized. That's why all the seemingly crazy loans. Sub-primes. 110% loans. Point is, the bubble made all things possible.
    One of the reasons it was so loose is because local cities and states recognized the massive potential influx of tax money by putting tons of people into homes. They pushed the federal government to pass laws and guarantees on these loans so they could, in turn, collect lots of property taxes. The bubble, like all bubbles, was entirely artificial, they were absolutely putting people into homes they could never afford, but with housing prices rising every month, lots of people were hoping they could refinance into better terms when their house suddenly was worth twice what it was worth six months ago. Unfortunately, when the bubble burst, the houses which were absurdly valued crashed and people were upside down on their loans and could no longer afford to pay for a house that was only worth half of what they owed on it.

    That's the unfortunate reality when people fall for bubbles. It happened in the 90s with the .com bubble, where anyone with a website could get all the free money they wanted even if they had never made a penny of profit. The financial world went to hell after that bubble burst too. Unfortunately, bubbles will keep happening and gullible people who think they can make a buck off of them aren't going anywhere. The only thing we can do is keep these important industries regulated so that the kind of mismanagement and paper shuffling games that caused the financial crisis can't possibly happen again.

    Whether we ever had MBS's or not is not what made it happen. You drop everyone's home value by 40% after a 10 year climb, and you got a major Recession regardless. Add to it bloated governments that rode that added revenue as well, and now cannot contract because they created a massive nanny-state, and behold a mess 100% of the government's doing.
    The government is an arm of the people. People demanded the government do what it did. Elected officials, wanting to get re-elected, did what they were told by their constituents to do. I agree it had disastrous results, but so long as the majority of any politician's concern is staying in office for as long as possible, what do you expect?
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