Last night, ABC "World News with Charles Gibson," and CBS "Evening News" both blamed increased foreclosures on lending companies and mentioned tightened regulation instead of discussing the issue of personal choice. NBC "Nightly News" was the only network to bring individual choice into the story on March 13.
"Mortgage companies were lending to people with questionable credit," said ABC's David Muir.
But it is not as if lending companies run around just handing out money to bad credit risks, people actually have to apply for home loans because they want to buy a home. Both ABC and CBS missed that.
Instead Muir's "World News" report pitied one couple "fighting to hold on."
CBS "Evening News" quoted Iowa's attorney general who called high-risk subprime loans "unfair" as well as "unwise and unsafe" on March 13. CBS reporter Anthony Mason also included the worries of an analyst who described the worst-case scenario of a housing-led recession.
"But at the very least, Josh Rosner [the analyst] says the housing market has 12 to 36 months of difficult times ahead," Mason stated.
But NBC "Nightly News" was much more accurate.
"Remember, we've had a very easy lending environment for several years now. People took out loans who probably couldn't afford them," explained CNBC's Maria Bartiromo.
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Let's see,,,, lenders took ri
March 14, 2007 - 16:00 ET by ThisnThatLet's see,,,, lenders took risks, handed out "liar loans", and all of a sudden the loans are defaulting. Everyone involved did this with eyes wide open. There's no blame to go around -- it's called freedom.
Besides, the default rate isn't that high, so there isn't a whole lot of people showing their stupidity. These defaults are isolated to a few institutions who "specialized" in risky loans, and the few people who took these loans out and now can't pay. What's the big deal?
I agree, TnT, people make
March 14, 2007 - 16:14 ET by motherbeltI agree, TnT, people are free to make choices, including stupid ones.
The article does say that mortgage companies don't just go around handing out money; "people actually have to apply for home loans because they want to buy a home. " The mortgage companies do advertise and solicit consumers for home-equity loans, though, which are essentially second mortgages. I wonder how many of the foreclosures are for nonpayment of those.
But it is still the consumer's responsibility not to take on more debt than he can handle. And taking on a second mortgage, and risking your home in order to consolidate credit card debt, for example, is, in my estimation, just plain stupid.
Since the government can't regulate stupidity, they might like to try regulating the other side of the equation, namely the mortgage industry, to "protect" people from making dumb choices.
I have one of those no-intere
March 14, 2007 - 16:20 ET by ThisnThatI have one of those no-interest loans. The lender did background checks; made me give him my last two years of W-2s; I had to provide proof of employment; the works. Still, there's a risk, but the lender and I agreed the risk was worth taking.
Some financial houses, apparantly, don't do that. And they are the ones going belly-up. Good. But I don't understand why this is viewed as a crisis. Of course Wall-street is not a rational place, so stock-market reaction isn't a good baromoter in this case.
I certainly agree that americ
March 14, 2007 - 16:35 ET by niner-four-whiskeyI certainly agree that americans abuse debt like a crackhead abuses the pipe.
On the other hand, the consumer credit industry is rife with deceptive business and predatory lending practices.
If this were not true, there would be no fine print.
Making loans to people who have little chance of paying the loan back and in most cases who simply do not understand what they are signing does no one any good.
What people don't understand is that there is enormous pressure and substantial financial incentive to making loans. Mortgage agents and brokers get substantial commissions on the loans they book. Unlike the old days, the mortgage broker is an independent middle man, not directly employed by the lending institution. As such, there have been a lot of incidents of fraud conducted by brokers. They lie to the consumer and they lie to the mortgage lender in order to get the loans booked and approved.
The "subprime" market in particular has been an area of substantial corruption. Over the past several years, with interest rates at very low levels, the sub-prime market was seen as a way to get increased returns with little risk. In a market full of low-interest money and rapidly rising real-estate values, the percieved risk to the lender was quite low. So they loosened credit requirements and made mortgages to people who could not afford them and in many cases, simply didn't understand the terms of their loans.
That this has all come home to roost is no surprise.
They're still using Bartiromo
March 14, 2007 - 19:02 ET by Tony SThey're still using Bartiromo as a source after all the recent controversy about her conflict of interest regarding business she covers?
The Lending Blame Game
March 14, 2007 - 19:18 ET by PamPart of the problem is that loans were given to people with no business getting them..Many of these lenders that are crying the loudest, took on customers that were almost sure to forclose, and foreclosure/resale is a big business within the finance trade...
Julia, I agree with you that personal responsibility is a key ingredient, but let's not pretend that some of these lenders are not loan sharks in disguise.
She was nonetheless spot-on.
March 14, 2007 - 21:04 ET by UnsaneShe was nonetheless spot-on.
"HAV3 TH3 BRIDG3S OF INSANITY B33N CROSS3D AND FOR3V3R R3TRACT3D???." - Meshuggah, "3ntrapm3nt", from Catch Thirty Thr33 (2005)
I'm in the real estate busine
March 14, 2007 - 22:13 ET by Del DolemonteI'm in the real estate business, and in the past 10 years I have seen so much in the way of questionable lending practices that sometimes I pull my hair out. And it did start on Clinton's watch, so it can't all be blamed on Bush, although he hasn't helped matters.
In the past decade, lenders have tried to save money by "streamlining" the lending process. Unfortunately this has included basing loans on property values that are generated by a computer model, and not by a real person such as a real estate appraiser. Such valuations are called "AVMs", and while they may work perfectly well in densely populated areas, they absolutely do not work everywhere.
In addition, many lenders won't even look at the property they're mortgaging at all-all they look at is the customer's ability to repay the loan. The problem with that it, Joe 6 Pack will buy a home that's falling apart, and his lender will never know because they never sent someone out to see if the home had any value before they issued the loan, and then when Joe falls into debt because he's spending money trying to fix his house, they wonder what's wrong!
Back in the good old days, the local bank sent the Board of Directors out to drive by the property they were asked to lend on before they made their decision. The only way this problem will stop is if we regress back to 1970, which will never happen.
Surf the money wave. As an e
March 14, 2007 - 23:06 ET by upcountrywaterSurf the money wave.
As an example in 2000 a home cost 200K. press the refy, button, woah instant cash. 2002 home worth 400K press the refy again, surf the money wave.. 2006 push the button again 600K.Surf the wave man. Now it is 2007 , that refy button is comming up snake eyes. Kuz the home is worth 550K . Let the slide begin uggg. No surf in sight
Nobody, especially nobody i
March 15, 2007 - 02:24 ET by sarcasmoNobody, especially nobody in the news media, is likely to connect this phenomenon with the things the unmentionable candidate has said about hard money, but there's a connection...
JMR
Roller coaster economics
March 14, 2007 - 23:24 ET by nkviking75It would be nice if all the bumps could be taken out of economics, but in a free market society it isn't possible. When some practice in the marketplace gets too far out of hand, economic forces have a way of snapping things back. If credit is too loose and too many default, lenders will tighten credit, and consumers (at least some of them) will become more cautious. Unfortunately, a lot of people will endure pain along the way. Ultimately, it's up to individuals and individual business to be as wise as they can about these matters.
The best path a man can choos
March 15, 2007 - 08:37 ET by jonathanandersonThe best path a man can choose is a debt-free path.
Deuteronomy 15:6
For the Lord thy God blesseth thee, as he promised thee: and thou shalt lend unto many nations, BUT THOU SHALT NOT BORROW; and thou shalt reign over many nations, but they shall not reign over thee.
Deuteronomy 28:12
The Lord shall open unto thee his good treasure, the heaven to give the rain unto thy land in his season, and to bless all the work of thine hand: and thou shalt lend unto many nations, AND THOU SHALT NOT BORROW.
Proverbs 22:7
The rich ruleth over the poor, and the borrower is servant [SLAVE ... he is ENSLAVED] to the lender.
1 Timothy 6:9-10
(9) But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition.
(10) FOR THE LOVE OF MONEY IS THE ROOT OF ALL EVIL: WHICH WHILE SOME HAVE COVETED AFTER, they have erred from the faith, and pierced themselves through with many sorrows.
Ecclesiastes 5:10-11
(10) He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.
(11) When goods increase, they are increased that eat them: and what good is there to the owners thereof, saving the beholding of them with their eyes?
Proverbs 17:1
BETTER IS A DRY MORSEL, AND QUIETNESS THEREWITH, than a house full of sacrifices with strife.
Proverbs 16:8
Better is a little with righteousness than great revenues without right.
Proverbs 15:6
In the house of the righteous is much treasure: but in the revenues [taxed, stolen, or borrowed money] of the wicked is trouble.
Proverbs 15:16
Better is little [just the things you genuinely need] with the fear [respect] of the Lord than great treasure and trouble therewith.
Romans 13:8
OWE NO MAN ANY THING but to love one another : for he that loveth another hath fulfilled the law.
The 3 Great Temptations to Go
March 15, 2007 - 09:15 ET by jonathanandersonThe 3 Great Temptations to Go Into Debt
1. Turn this stone into bread ... "I need a house". No you don't. You need shelter. Stay with friends, family, your car, rent, or buy a mobile home outright until you can build your own without going into debt.
2. Cast thyself down from hence ... "I need a new car". No you don't. You need transportation. Get a $200-500 vehicle, a car manual, a $30 tool set and fix one problem at a time (or ask your Granddad to GIVE you that 1994 Buick that's been sittin' in the driveway for a year).
3. If thou wilt worship me ... "I need credit cards". No you don't. You don't need a DEBT card. You need a DEBIT card. Get a checking account, put $500 in it, and THERE'S your line of credit. Now all you have to do is live within your means. If Joe Dirt in Bucktown, Alabama can live this way ANYONE can do it ... any man worth his salt can do it.