by Terry J. — July 10,2007 I find it disturbing that people would perpetually blame the consumer for being swindled. If you buy a used car from a swindling scum who lies to you about what you are buying, are you to blame that the car, while appearing to be a value, turns out to be a total lemon? Of course not.
The mortgage-backed securities (MBS) market fed this subprime mortgage crisis with its profound hunger (greed) for subprime mortgages. People were sucked in by "professionals" who pretended they had a fiduciary duty to the homebuyer. In fact, they were looking for nothing more than a quick payday. The mortgage brokers were egged on by the MBS market on Wall Street. Banks were in the game, too. The Office of the Comptroller of the Currency and other federal "watchdogs" were busy looking out for their buddies in the industry instead of regulating what was happening.
When all this shakes out, whether you think home buyers are to blame or not, or partially to blame, or whatever, this is going to have a profound effect upon the overall economy which was buoyed through the post-9/11 economic catastrophe not by tax cuts, but by the housing market. Included in that package of economic life preservers were the myriad refi products that encouraged homeowners to strip equity for consumer spending.
It's not a partisan issue, people. And before you hammer us like wet bread with your "personal responsibility" rhetoric, you should be asking why the brokers, bankers, and regulators should not also be held personally responsible for the massive fraud in this game. If a con man comes and rips off a mark, why would anyone want to blame the victim?
Anyone who has been to a real estate closing knows full well about the blizzard of paper that you are required to initial and sign. Just you try to read it. You will find that 1) everyone will get steamed at you for trying to do so, and 2) you won't understand what the heck you are reading. Anyone here who says they read the closing documents on their home purchase BEFORE closing is a liar.
Can any of you tell me what a "Y.S.P." is? Probably few can but you might find one in your closing documents. It's a yield spread premium -- also known as a "kickback" from the lender to the mortgage broker for steering the consumer to a higher interest rate than that for which he qualified. This is explained away at closing as if it were a necessary fee. Anyone know what a "rate sheet" is? You should if you are going to buy or refi unless you want to give away money.
Finally, why is it that brokers and lenders who are engaged in underwriting are allowed (even encouraged) to underwrite the loan at the teaser rate on an exploding ARM, instead of underwriting it at the fully indexed rate? Who ends up holding the bag on that one? If it forecloses, not the brokers and bankers who cashed out, but the neighbors, the holders of interest in those securities, and the economy as a whole.
This whole mess stinks worse than the S&L scandal and people want to engage in what is tantamount to blaming those who had their money in the S&L's -- blame the victim. It makes me sick.