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March 18, 2007
The Mortgage Crisis - This is not a new story
I remember seeing a report on one of the news magazine shows a couple of years ago about the huge number of people around the country, but especially in the west who took out these sub-prime mortgages. The concern at the time was that a day of reckoning was going to come. The housing market would eventually change, and folks would suddenly be hit with huge payments, something their paychecks could not cover. I seem to recall that it made the news for a few days then disappeared, as most important news items do in this MTV world. No one paid much attention, until now. And suddenly it is the banks fault. (Reuters)
It is hard to blame everyone who took out these loans, but buying a home is serious business. One borrows a tremendous amount of money. I would think that you should always have a CPA or lawyer review the terms before signing. I feel extremely bad for anyone who might have to default, but this is partly their own fault.
Many people accepted complex mortgages to buy homes that were probably out of reach, but deals such as 100-percent financing and adjustable-rate mortgages that initially carried low monthly payments encouraged excess, critics contend.
"The quality of the loan has everything to do with this crisis," said Josh Nassar, vice president for federal affairs at the Center for Responsible Lending in Washington.
Among the biggest culprits were the so-called "2-28" loans that offered low interest rates and payments for the first two years, but then spiked up. Many borrowers misunderstood the terms or thought they could refinance, and found themselves stuck with mortgages that they could no longer afford.
Buying a house is serious business. One is borrowing a tremendous amount of money to purchase a home. I would think that in such a situation a potential buyer would have the agreement reviewed by a CPA or lawyer. As bad as the mortgage lenders may be, they are not the only ones to blame here. I feel very bad for anyone who might have to default on their mortgage, but they need to accept some of the responsibility.
Posted by Chip Spear at March 18, 2007 12:14 PM