“lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing.”

[vision63]

I like Charlie, so I'd remove him from the equation.

[mikeylikesit]

Charlie is a likeable crook the best kind.

[Lux Interior]

DaveS wrote:

To answer the question one has to at least place some theoretical guidelines into the picture. Let us assume a man has legitimately qualified for a $7,500 Credit Card and a mortgage payment $500.00 per month. He has $15,000 in equity in his house in his $150,000 house. Basically a 10% down payment.

Over time he borrows all of his CC credit line, i.e. Christmas presents, new tires, replace a water heater etc. He decides to move that $7,500 to his mortgage, The bank writes him a new mortgage based on a 5% equity - legal - and he perfectly qualifies for the new payment PROVIDED he does NOT begin to use his credit card again. The bank has actually HELPED him legally TRY to regain control.

But he decides the following Christmas to spend more than he should, goes on vacation, etc. and is back up to $5,000 and a payment he can not afford. He's back to square one - in debt for more than he can afford.

Ain't the banks fault. The bank can not control how much OTHER credit a borrower decides to use. The bank was not irresponsible, the borrower was.

And if you look at the outstanding balances of CC's - you will see that this is a very typical problem.

I think I can add more theoreticals:

Take this obviously fiscally irresponsible home owner and then offer him a refinance with an incredibly low interest rate (because it's a one-year ARM) and then take his wildly appreciated home value (now $250,000) and give him a home-equity line of credit of $100,000 and set him loose!

Within a year, he has financed his old credit card debt as well as two new SUVs, a three-week European vacation, 50" plasmas for every room including the newly re-done bathroom with Italian marble tile and jacuzzi tub. At the end of the year, he has the HELC maxxed out. Then the property values crash and his interest rate skyrockets and he can't pay the mortgage anymore and goes into foreclosure. He owes more than the house is worth, so selling it won't take him into the black.

Meanwhile, this is happening to lots of people because an aggressive mortgage broker who didn't give a rat's a$$ about their ability to repay (why should she, property values will keep going up & up & up &...) sold them mortgages that they really couldn't afford.

There. Your story was a bit old fashioned. One that many people have been going through for decades. Add the extra twists & turns and we see a pyramid scheme based on unrealistic interest rates & property values collapse.

[mikeylikesit]

By Dave's account. the banks and lenders are the victim of swindlers and thieves. I doubt that was the real case; even he'd be hard-pressed to make that scenario as being the norm.

Dave has this knee-jerk problem. Someone should get him to a neurologist.

[mattkime]

Black Landlord wrote:
Anyways, you make it sound like not having "training" in finances absolves a consumer from having to make decisions within their budgets.

Well, if we're trying to achieve home ownership for everyone, its going to include quite a few people who don't know how to live within their means.

Sure, it would be nice if people truly understand their mortgage but i don't think thats realistic goal. they have to rely on experts. the bank used to play the expert role but they switched once there was money simply in getting someone to sign the papers.

[OWC Jamie]

mikeylikesit wrote:
...a quote from Mr. Bush.

Could anyone here explain to me how there can be irresponsible borrowing without there first being irresponsible lending?

Anyone?

You know no one who has run up several credit cards and gotten into trouble ?
Blame the credit card company ?

No one who has bought drugs and not paid for them ?
Blame the dealer ?

No one who has gambled borrowed money and lost ?
Blame the house ?


There were and are those who played the system and got caught.


There was creativity on both ends, thoroughout may be a better analogy.

There were and are certainly victims .
There were and are plenty thet knew they could be victimized and took the risk.

[mikeylikesit]

When I wuz a mere youth, lenders didn't lend to people who wouldn't pay them back. The lenders went out and got the rules changed and now you don't seem to want to hold them responsible for being irresponsible.

Why is that?

[Lux Interior]

mikeylikesit wrote:
Why is that?

It seems that for some "personal responsibility" begins and ends with the poor schlub who isn't bilking the system for billions.

[rgG]

Lux Interior wrote:
[quote=mikeylikesit]
Why is that?

It seems that for some "personal responsibility" begins and ends with the poor schlub who isn't bilking the system for billions.
You mean the poor schlub who put no money down and then walked away from his loan? Many of these poor schlubs were also trying to bilk the system by buying the house with no money down and then planning to flip it when the price artificially went up because of all this irrational lending and buying.

There is enough blame to go around for everyone on this deal.

[Lux Interior]

rgG wrote:
There is enough blame to go around for everyone on this deal.

I never denied that.