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Who to blame: the lender or the borrower?

Who deserves the blame for a loan default, the borrower or the lender?

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

    Votes: 15 55.6%

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

    Votes: 11 40.7%

  • The government for guaranteeing the loan

    Votes: 7 25.9%

  • The government for failing to adequately regulate the lending process

    Votes: 7 25.9%

  • All of the above

    Votes: 11 40.7%
  • Total voters
    27
All of the Above covers it but I have to spot light the Housing and Community Development Act of 1977 wich got the bubble expanding way back over 30 years ago, so blame the 1977 Congress, Senate, Jimmy Carter and while you're at it, all those who have followed and did nothing about it.
There is plenty of blame to go around.

Funny, Carter had a winning smile and loosing Administration, Obama has a great line of BS and a loosing Administration.

Wow, it's amost like those three monkeys only were missing one who should I pick. I Carter looked like no evil but was, we have does nothing but evil, and whom should I pick for the last one? Oh I got it, Clinton can be almost evil, but not quite. :lamo

220px-JimmyCarterPortrait2.jpg
 
Rhapsody1447 said:
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?
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Yours, but if the bank gave you a $500,000 home loan for only $10,000 down, or something else stupid along those lines (as seems to have happened in many cases before the recession), then the bank definitely deserves some blame for ****ing up so bad on something they are supposed to be professionals at. Government insuring loans isn't necessarily a bad thing, but only if they are only insuring ones that were made to creditworthy borrowers.
 
Thunder said:
lenders should make sure those they lend large sums of money to have the means to pay back the loan.

if they don't do that, they put their investors in jeopardy.
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Note that the lenders employees don't put themselves in jeopardy, they get their commission, bonus and salary and don't have to give back the money they made in getting ridiculous loans done.
 
Rhapsody1447 said:
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?
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I don't know that fault is a concern here, I'm more interested in whose responsibility it is. If you sign your name on the dotted line, you guarantee to repay the loan regardless. If you can't do it, you default on the loan and ought to lose the house, period. Now that's not to say that the bank might not bear some fault for misleading the consumer but that's a separate issue. You took the loan, you signed the document, you either follow your agreement or you turn over the keys.
 
Rhapsody1447 said:
So if I take out a loan and fail to repay it, is it my fault or the bank's?
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It's the bank's fault. It's their business. They are presumably the one's to suffer should you default. Therefore, the real onus is on them to make sure you are good for the loan.

Of course, if Uncle Sam is guaranteeing the loan, then the onus is on Uncle Sam, which means the onus is on the taxpayer. Therefore, if you are a taxpayer, then the onus is on you. If you are not a taxpayer because you do not make enough money to be a taxpayer, then the onus is not on you, and you can do whatever you want.

That being said, if you are not a taxpayer and you default, then those who are taxpayers should retain the right to have you, and the banker who granted you the loan, drawn and quartered, live on pay-per-view.
 
Cephus said:
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.
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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?
 
Rhapsody1447 said:
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.......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?
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Both, but the banks should have known better......
I 'd like to hear from a banker.....
 
OhIsee.Then said:
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?
Click to expand...
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.
 
earthworm said:
Both, but the banks should have known better......
I 'd like to hear from a banker.....
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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.
 
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.
 
Cephus said:
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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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.
 
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Eighty Deuce said:
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 !!
Click to expand...

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.
 
Didn't a wise man once say "neither a borrower nor a lender be?"
 
Cephus said:
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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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.
 
Eighty Deuce said:
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 ?
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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.
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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.
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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?
 
Always, always, always blame the party that knew better or should have known better. The banks should have known better (though they had pressures from the government to make bad loans). The government should have known that government backed anything will be paid for by the government. Just ask the airline pilots that lost their pensions after 9/11. The borrower is also liable for not meeting obligations they requested. I blame them all, except for the regulation part. We shouldn't regulate stupidity.
 
Unfortunately, we need to regulate core industries where broad stupidity is going to have far-reaching consequences.
 
Cephus said:
Unfortunately, we need to regulate core industries where broad stupidity is going to have far-reaching consequences.
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No we don't. No goal is so noble as to warrant the erosion of individual freedoms.
 
ksu_aviator said:
No we don't. No goal is so noble as to warrant the erosion of individual freedoms.
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Because we shouldn't have an FDA, it might erode in the individual freedom to sell poisonous food. :roll:
 
Cephus said:
Because we shouldn't have an FDA, it might erode in the individual freedom to sell poisonous food. :roll:
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Hardly the same. In your example the FDA regulates producers that can hide the risk of their product. It is impossible for the average consumer to view the facilities of every food production company. However, the consumer is acutely aware of the risk of borrowing money.
 
ksu_aviator said:
Hardly the same. In your example the FDA regulates producers that can hide the risk of their product. It is impossible for the average consumer to view the facilities of every food production company. However, the consumer is acutely aware of the risk of borrowing money.
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Apparently not, according to some posters here who are convinced that the average consumer is so stupid that they'll put their name on any piece of paper that's put in front of them. Unfortunately, that's largely true and when people are stupid in large groups, bad things happen.
 
Obviously the answer is all of the above.

And to those who think borrowers are largely innocent.
If you get a mortgage, then go spend crazy on credit cards and auto loans, then lose your job.

Guess what?
You ****ed up big time.
 
Cephus said:
Apparently not, according to some posters here who are convinced that the average consumer is so stupid that they'll put their name on any piece of paper that's put in front of them. Unfortunately, that's largely true and when people are stupid in large groups, bad things happen.
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Well you can make that claim about anything. By that logic we'd have to ban driving, spandex and fast food. If you want to be unharmed by stupidity, anticipate it. There are plenty of people that made big money buying gold as the calls for an economic collapse came down. My point is, don't try to make someone else be smart...just worry about what you can control.

Ultimately:

Freedom > Results
 
ksu_aviator said:
Well you can make that claim about anything. By that logic we'd have to ban driving, spandex and fast food. If you want to be unharmed by stupidity, anticipate it. There are plenty of people that made big money buying gold as the calls for an economic collapse came down. My point is, don't try to make someone else be smart...just worry about what you can control.
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Yet most of the things you list, we regulate. We control how fast people drive. We control safety devices on cars. We have food laws. We don't have to ban any of it, we just have to keep people from taking advantage of others.
 
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