Giving Up
Posted on March 14, 2007 - Filed Under Rant |
So yesterday, headlines splashed the papers that predicted the end of all civilization as we know it due to subprime lending problems. When lenders loan money to those with low credit scores, they shouldn’t be surprised that these people default.
As with my rant from the other day, people are getting access to equity quite readily. I do not have a problem with this, as long as the people are responsible with their money. But I fear these people are suffering from the Lottery Syndrome, whereas they are going to follow the same habits when it comes to money.
But all does not have to be lost. In this article, the author surprisingly offers those in trouble this statement:
Doug Duncan, the mortgage association’s chief economist, suggested that
borrowers having difficulties making payments contact their lenders as
soon as possible to work together on the problem. "It is in everyone’s
interest to keep the homeowner in their home paying their bills on
time," he said.
I just wonder if the world understands this. Lenders should be screaming it from the top of all the mountains all around the world.
EDIT: After writing this entry, something occured to me: the responsibility lies with borrower. Independent of whether the individual is financially literate or not they must also take action. The subprime lenders probably chopped down a few trees, sending letters to the defaulted borrowers. It is the borrowers who must take the action of straightening up their mess.
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Comments
4 Responses to “Giving Up”
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Clifford
I am not sure I agree with your statement that it is the borrower’s responsibility. To me, another name for “borrower” is “customer”, and the “lenders” are just another business. In their attempts to improve their bottom line, the lenders will sell their product to any one who remotely qualifies.
It is almost always a win/win for the lender (either they have interest coming in for 15+ years, or foreclosed properties to sell).
Also, the product “sold” is couched in reams of paperwork with a variety of choices to chose from. Even the most astute have trouble understanding the offers and the effects it will have on their lives.
Tie that in with the even more confusing external advantages/disadvantages of homeownership (i.e. tax implications, homeownership repairs), and I am sure the average “Joe” signs along the dotted line with trust in the lender.
I try to live my financial life with a “Buyer Beware” attitude, but even for me, the massive amount of knowledge required for mortgage ownership is intimidating.
I’m going to respond to this sometime in the future.
Mikki,
Just because its complicated and hard to understand doesn’t mean its not my fault if I don’t know what I’m doing.
The buyer should know what they can reasonable afford. I don’t care if someone tells me I can afford a $3M house. I know in my gut that I can’t.
Kenric
Cliff was blaming the borrower for the implosion of the sub-prime lending world. I was merely disagreeing. I do not feel it is the fault of the customer for the business’ problems, but the fault of the business itself for lending to those that are scammed into believing they are a valued customer, gut reaction or not.
I agree with his comment of “they {lenders} shouldn’t be surprised that these people {borrowers} default.” but do not agree with the comment that the lender problems would go away if the borrower would step up to the plate.
I also feel that no matter the griping of the lending agents, they still win either way.