SubPrime News: American Consumerism and Greed Fuels Mortgage Debacle 

SubPrime Rants (if you don't agree it's ok, but are you doing something about it?  Read on and rant with me...)

Just like a child who is guilty of wrong doing and points their finger at someone else, the American consumer is now pointing their finger at someone else.  I say they need to look at the three fingers that are pointing back at them and take heed.  Learn this simple lesson, if you cannot afford the payment, don't buy it!  If the payment will increase to XXX in the near future and if that seems too high, don't buy it!  Plain and Simple. 

You have undoubtedly heard the countless stories the mainstream media is telling through your television sets, websites, and newspapers regarding mortgages which carry volatility, adjustments and skyrocketing payment increases, supposedly to the unsuspecting homeowner.  While I agree there is need for improved oversight and investigation into the poor practices of these lenders who have provided loans to you, another responsibility is equally important.  The American consumers insidious desire to consume, spend, and to live well beyond their means is a big part of the events that are unfolding before us.  These spend it before we earn it consumerism habits have been in place long before the housing boom cycle of late took shape, however through seemingly endless astronomical appreciation and recycled home-equity, most people were able to refinance out of their debt-loads, creating larger debts, while others took their equity and sold their homes.  Take away the increased appreciation in housing values and replace it with a flat housing market and those habits which many American consumers subscribed to could no longer be bandaged by a refinance loan into another to keep their payments artificially low while their phantom-equity kept them afloat. Instead we are seeing case after case of foreclosure, doom and gloom by the media and an exposition and downfall of subprime lending companies whose primary objective was to fuel the false hopes of these already at-risk borrowers by enabling them to participate in the stripping of their equity while waving the magical wand of a refinance loan a few years later, however it only worked when housing values were increasing.  As values flattened during the last 18 to 24 months, people soon realized that their lifestyles can no longer be sustained by their Home (equity) ATM machine. 

If you are upset by reading my comments, you should be.  The less-than-perfect credit situation or "sub-prime" loan companies that are making the news lately are the culmination of the actions described above however it is merely an economical storm that will blow through our Country bringing with it devastation and destruction like a hurricane or tornado does.  We recover from these storms in time, it brings people together and reunites them with the fabric of Americans. When a hurricane or tornado blows through an area and causes widespread damage people do not rush out to blame the weather man or meteorologist?  No!  The ethical, reputable, and knowledgeable loan officers and mortgage brokers are not to blame for these occurrences.  Actually there are no single sources of blame for these events today, it's an accumulation of different aspects ranging from American consumerism and greed, keeping up with the Jones and buying everything on credit, to the lenders who offered these loans with easy to qualify don't ask don't tell guidelines, tempting low-rate and artificial payments, to the misleading, inexperienced and uneducated loan officers who put greed before the client at the demand of the buyer who wanted the home of their dreams, to the beck and call of their real estate agent or broker who demanded that the transaction close or they'll pulll the deal from you because they referred them to the loan officer, who placed the loan with the lender, to satisfy the need, greed, and lifestyle of the American Consumer who has to blame someone.  STOP it already. 

The American consumer needs to be educated, empowered and learn to protect themselves by knowing their rights.  As far as I know nobody held these home buyers and refinancers at gun-point stating they need to sign the loan docs or the kid gets hurt.  If the paperwork didn't add up and my guess it didn't in many cases, then walk-a-way, do not sign anything unless you are ready to take full responsibility for your actions including repaying the loan, can you spell NOTE?  Remember, you are an adult, capable of entering into a legally binding, fully enforceable contract, not a child who needs to point a finger and blame someone else. 

The American consumer needs to learn that a mortgage is a debt and it requires repayment.  If someone cannot afford to pay the monthly payment in the near future, then serious consideration should be given before taking out the loan in the first place.  C'mon excerise some restraint here...if you can't pay then don't play!

Maybe I am too conservative or perhaps I like to educate my clients in ways that will help them long term as opposed to just making a buck and moving on.  Maybe I'm a dying breed of mortgage professionals who want to help people and help them keep their homes by not placing them at additional risk.  Maybe I am not always popular with Realtors or Builders who "only want to close the deal...who cares about the client", maybe there are borrowers with whom I advised..."not now...lets work on this or that"  or those that I plain out told "no". Do you want me to continue? 

As ethical, reputable and responsible mortgage professionals we have a greater accountability to our customer than those who choose to put themselves first.  Usually it's those same people (the greedy Realtors, Lenders, and Loan Officers) who are the ones crying wolf when things go crashing down around them, the ones who go back to "regular" jobs when they can't cut it and they can't afford their Beemer or $4,000 a month mortgage payments.   Those individuals were never true real estate industry professionals in the first place, they saw an opportunity to exploit those in the community without any regard to the damage they cause. 

Foreclosures destroy neighborhoods and communities.  You get too many of them in one concentrated area and it will devesate all property values, actually those who perpetrate such a farce on the community they live in will feel the effects of their actions as their own home values will decline and diminish, again they will cry out how this person did that or another did this, etc, but will they stop for a moment and stop their actions?  Hopefully they will come to recognize their errors my making things right, correcting their wrongs and admitting their guilt and point their finger at themselves. 

Comments are welcome, remember - I'm speaking out whats on my heart...what are you doing about it?  I'll tell you what I am doing about it and how you can help, we'll talk about it in another post very soon. 

PS Are you aware that only 20% of ALL loans are Subprime Loans?  How about only 40% of those were purchase loans or about 6-8% of ALL purchase loans are subprime loans?