Tuesday, December 11, 2007

Don't Blame Consumers for Bad Loans

Now that it is clear the US economy has tanked behind the sub-prime loan scandal, the blame dogs are loose. And of course, it's the consumer's own fault they got screwed by system and owe their souls to the man. Yea, uh-huh. Like I believe that.

Here's the real story, told by countless victims across the country. For background, we all live hurried, complicated and stressed-out lives; and so we often turn to trusted professionals for counsel and advice. When those professionals turn into preditors, the system doesn't work. I know, because I have friends and relatives who were caught in the web of deceit. In the last few years, this is the counsel that an army of loan officers has been providing their trusting customers.

Let me show you the benefits of home ownership. Bottom line, it's like owning the bank. And I can get you into a house of your own no matter how bad your credit or insignificant your job. No problem. We can even finance 100 percent of the transaction, including my fees and the loan origination costs, to make it easier yet. Why wouldn't you want to do this? Look, this is the way that the very rich have been playing the system for years, now you can do it too. What's not to love. We'll just do an adjustable rate first, a second on top of that, and no down payment is necessary.

Often, I suspect, troubled spouses and partners asked: Are you sure we can afford this? Well, when my friends posed that question, they were told the following:

Look, real-estate is a sure thing. It just keeps going up in value. You will always be on the black side of the ledger and if worse-comes-to-worse, you can easily refinance. But you'll have to move fast to take advantage of these rates and this deal.

Given the fact that the middle-class is always working diligently to move up and improve their lot, it doesn't surprise me that many were swayed by these hard-sells. And yes, some even attempted to leverage real-estate speculation to launch themselves into the upper-class. It's the American Dream, after all. But no, they should have known better. What made all these sincere and enthusiastic investors think they could actually "invest" their way to prosperity and a share of the wealth? All consumers deserve, it seems, is scorn and ridicule from the pundits, from shocked bankers and from smug corporate CEO types. What should make this day different than any other?

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