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?

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    Who to blame: the lender or the borrower?

    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, banks pushing loans on people who can't afford them), however sometimes it is necessary for the government to ease credit conditions in order to help spur economic growth (e.g. by making it easier for people to buy a house or start a new business).

    So if I take out a loan and fail to repay it, is it my fault or the bank's?
    "There is an excellent correlation between giving society what it wants and making money, and almost no correlation between the desire to make money and how much money one makes." ~Dalio

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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, banks pushing loans on people who can't afford them), however sometimes it is necessary for the government to ease credit conditions in order to help spur economic growth (e.g. by making it easier for people to buy a house or start a new business).

    So if I take out a loan and fail to repay it, is it my fault or the bank's?
    It depends. Did you lie on your application? Did you say you made more money than you made? Worked where you said you worked? For the length of time you said you worked there? Earned what you said you earned? Did you lie about what you oiwed on credit cards? If you didn't lie on your application, in my opinion, its not your fault.

    Mortgage brokers lied. They failed to disclose a whole bunch of stuff to borrowers. Like: zero interest for a year, then 12% after that for the next two, then 14% after that; Like 1% interest for two years, then a balloon payment due. What they didn't explain was that if your home didn't appraise, you couldn't get refinanced in order to pay off that balloon, so you'd lose your home. Most people aren't financially savvy. These are the people who trusted mortgage brokers. Mortgage brokers knew their stuff inside-out; worked on commission; sold anybody they could stupid mortgage products that weren't at all in their best interests, and quickly moved on. Jerks.
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    Re: Who to blame: the lender or the borrower?

    I pretty everyone to some degree, though there are exceptions to everything. The borrower deserves blame for taking out a loan they couldn't pay off. The lender deserves some blame for giving a loan to someone with a risky credit history. And the government gets some blame for not regulating things better.

    Though in a lot of the cases in the last few years, it's hard to blame anyone but the circumstances. If someone had a good credit history and was paying faithfully on the loan, then lost their job and defaulted before they got a new one, it's hard to lay blame at anyone's feet in particular.
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    Re: Who to blame: the lender or the borrower?

    Quote Originally Posted by MaggieD View Post
    It depends. Did you lie on your application? Did you say you made more money than you made? Worked where you said you worked? For the length of time you said you worked there? Earned what you said you earned? Did you lie about what you oiwed on credit cards? If you didn't lie on your application, in my opinion, its not your fault.
    I think we can all agree that if you did any of the above you are obviously the guilty party. But, there is a gray area outside of the two extreme examples you used. What if I took out a loan and simply couldn't repay it? Typically, this would occur as a result of me making certain reasonable assumptions about my future income that didn't materialize. Who is to blame if I simply fail to meet my debt obligations despite being honest about my credit history/income and knowing full well the terms of my loan?

    Mortgage brokers lied. They failed to disclose a whole bunch of stuff to borrowers. Like: zero interest for a year, then 12% after that for the next two, then 14% after that; Like 1% interest for two years, then a balloon payment due. What they didn't explain was that if your home didn't appraise, you couldn't get refinanced in order to pay off that balloon, so you'd lose your home. Most people aren't financially savvy. These are the people who trusted mortgage brokers. Mortgage brokers knew their stuff inside-out; worked on commission; sold anybody they could stupid mortgage products that weren't at all in their best interests, and quickly moved on. Jerks.
    While I agree with you that these predatory lending practices were rampant and completely unethical. However, the terms of a loan agreement were fully disclosed under law as they would have to be present in the loan document the borrower signed in order to be a legal contract. It's true these lender assholes didn't explain the terms properly and failed to mention key elements (e.g. balloon payments, adjustable interest rates) of the loan in order to manipulate the borrower for the sole purpose of making a commission. However, all terms would have to be disclosed in any contract signed by the customer in order for it to be legally binding.
    "There is an excellent correlation between giving society what it wants and making money, and almost no correlation between the desire to make money and how much money one makes." ~Dalio

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

    the root cause is the elimination of jobs in pursuit of artificially cheap consumer goods.

    the credit crisis is a symptom, not the cause.

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

    What kind of loan are we talking about? If it's something routine, like credit card debt, then both parties are to blame. If it's something like a mortgage, then it's mostly the lender's fault. The average consumer doesn't have much experience with how to choose a mortgage; for many people it's a once-in-a-lifetime purchase. The banks don't have that excuse: they live and breathe loans, and they should know better.
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    Re: Who to blame: the lender or the borrower?

    Quote Originally Posted by Rhapsody1447 View Post
    I think we can all agree that if you did any of the above you are obviously the guilty party. But, there is a gray area outside of the two extreme examples you used. What if I took out a loan and simply couldn't repay it? Typically, this would occur as a result of me making certain reasonable assumptions about my future income that didn't materialize. Who is to blame if I simply fail to meet my debt obligations despite being honest about my credit history/income and knowing full well the terms of my loan?
    If you simply couldn't repay your loan, you're at fault. Look, it's not always black-and-white blame. Say a guy loses his job and can't find one. Well, yeah, it's his fault he falls behind on his mortgage; but is the fault one of irresponsibility? Or bad luck?

    While I agree with you that these predatory lending practices were rampant and completely unethical. However, the terms of a loan agreement were fully disclosed under law as they would have to be present in the loan document the borrower signed in order to be a legal contract. It's true these lender assholes didn't explain the terms properly and failed to mention key elements (e.g. balloon payments, adjustable interest rates) of the loan in order to manipulate the borrower for the sole purpose of making a commission. However, all terms would have to be disclosed in any contract signed by the customer in order for it to be legally binding.
    You're right. Borrowers clearly sign disclosure statements. But they don't understand them. I'll tell you that right now. I sat at the closing table with these people. As the attorney began explaining their mortgage to them, their eyes glazed over. Way beyond their expertise. Hard workers. Dependable. Honest. [U][B]But they don't understand APR, balloon payments, 0% amortization loans...heck, probably many people right here (a more sophisticated group than many) don't understand it either.

    Be completely honest. The last time you bought life insurance, did you read the policy? If you say you did, you're lying. Brat! Ha! Health insurance? Ja' read it all before you signed? Of course not. You trusted the person who said, "Sign here." And this is how borrowers got ****ed over.
    The devil whispered in my ear, "You cannot withstand the storm." I whispered back, "I am ​the storm."

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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, banks pushing loans on people who can't afford them), however sometimes it is necessary for the government to ease credit conditions in order to help spur economic growth (e.g. by making it easier for people to buy a house or start a new business).

    So if I take out a loan and fail to repay it, is it my fault or the bank's?
    Both are responsible for their behavior.

    Moreover, their actions are not necessarily the only factors that have contributed to the default. A business that handled itself irresponsibly and had to lay off the person who took out the loan also holds some responsibility as do politicians who decreased regulations on banks.

    Everything is interconnected. In such an interdependent society, it is impossible to legitimately blame one person or entity for the many of the problems that exist. Every person or entity is responsible for their/its actions and in turn, the consequences of those actions. Therefore, whatever role a person had in his inability to pay for a loan coexists with the role the bank had in giving him a risky loan and both of these actions coexist with the actions of employers, the government and everyone in-between.

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

    Quote Originally Posted by MaggieD View Post
    If you simply couldn't repay your loan, you're at fault. Look, it's not always black-and-white blame. Say a guy loses his job and can't find one. Well, yeah, it's his fault he falls behind on his mortgage; but is the fault one of irresponsibility? Or bad luck?
    I agree. However, despite whether the circumstances were a result of irresponsibility or bad luck I would still place the blame on the borrower. I can't, in good conscience, blame the lender for the borrower's failure to meet his/hers obligations. This by no means makes the person immoral for borrowing money they believed they could pay back (as they would if the person lied like the examples you provided).

    You're right. Borrowers clearly sign disclosure statements. But they don't understand them. I'll tell you that right now. I sat at the closing table with these people. As the attorney began explaining their mortgage to them, their eyes glazed over. Way beyond their expertise. Hard workers. Dependable. Honest. [U][B]But they don't understand APR, balloon payments, 0% amortization loans...heck, probably many people right here (a more sophisticated group than many) don't understand it either.

    Be completely honest. The last time you bought life insurance, did you read the policy? If you say you did, you're lying. Brat! Ha! Health insurance? Ja' read it all before you signed? Of course not. You trusted the person who said, "Sign here." And this is how borrowers got ****ed over.
    Of course, you are absolutely correct. The majority of these agreements are skipped over or completely ignored. However, in respect to a loan agreement, I would make sure I 100% understand what my financial obligations are going to be before I sign something. In this case, I would still have to blame the borrower for their apathy in understanding what they were signing. Ultimately, if I sign a legal contract, I am responsible for knowing what I am agreeing to.
    "There is an excellent correlation between giving society what it wants and making money, and almost no correlation between the desire to make money and how much money one makes." ~Dalio

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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, banks pushing loans on people who can't afford them), however sometimes it is necessary for the government to ease credit conditions in order to help spur economic growth (e.g. by making it easier for people to buy a house or start a new business).

    So if I take out a loan and fail to repay it, is it my fault or the bank's?
    It depends on the situation. Sometimes the answer is neither. There will always be loans out there that won't be repaid due to some exogenous factors. Just like there are always investments that don't pan out.
    Last edited by StillBallin75; 10-24-11 at 10:08 PM.

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