Isgrimnur wrote:Not everyone in the world is smart enough or willing to peel back the curtain when someone promises them that all their dreams can come true.
No excuses (for them). According to this guy. If you aren't smart enough to understand the terms of your mortgage, you shouldn't have one. Again - not terrible advice when it comes to personal finance.
Just totally irrelevant when it comes to why credit markets seized.
That makes no sense. The people who walked away understood the terms. That was precisely why they walked away. The terms of my mortgage were: if I didn't then pay the government would kick me out my house and the bank would take possession and tank my credit. That was the deal. Defaulting is part of the deal. And that was the so many people took when the market tanked. Even if all of the mortgagers defaulted, the banks should have come out ahead getting both the principle paid so far and interest and
the house valued at what it was appraised for.
But it's not illegal to default on your loan and get your house repossessed nor should it be. It's so not illegal that if the bank thinks you're a risk, then you pay higher interest even though they get your house if you default. It's so not illegal that if the bank can't secure enough money from you up front, they charge you insurance against defualting even though they get your house if you default. The bank needs to do due diligence on the lendee and more importantly the property when they agree to give you money and secure your home as terms for non payment. Notice how when the banks could no longer package shitty loans and could no longer encourage overpaying for houses they stopped giving money out, even when the Fed literally gave them free money with the expressed intent of loaning it out. And they didn't loan money from QE, it took strong arming and nearly two years of effort from the Obama administration to actually get them to use the Making Homes Affordable money to help underwater mortgagers refinance. Even though I was eligible Citi refused and sold my mortgage to IBM who also refused. It took Obama going to Quicken loans to set things right in 2012 before a bank would deal with me. (Of course by then refinancing no longer made sense.)
Now groupthink defaulting is a shitty thing to do and was a catalyst for exacerbating the crash but the
cause was overvaluing of homes which meant getting people into homes they didn't care about with too much of their incomes at stake (the banks fault).
If your associate is to lay proximate blame in anyone other than the banks then I'd blame the Carter administration and their idea that every one should own a home, encouraging government, bank, and individual toward that end.
I'll be he's dyed in wool republican and would have no problem blaming Carter.