The Real State Of The Housing Environment

I came across this article this morning http://www.marketoracle.co.uk/Article795.html  Please take some time to read it.

Although I can't take credit for the content, I must say that the author of the article simply hits the nail on the head.  The Government is not entirely to blame for the current state of the housing industry.  However with comments like this from former Fed Chair Alan Greenspan: "American consumers might benefit if lenders provide greater mortgage product alternatives to the traditional fixed rate mortgage. To the degree that households are driven by fears of payment shocks but willing to manage their own interest-rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home." it gave lenders the green-light to basically forget everything they knew and give loans to just about everyone who applied. 

I have said before that we (everyone in the housing market, Lenders, Realtors, Builders, Appraisers etc.) are mostly to blame.  As a lender, how could I in good conscience promote a loan (the dastardly 2/28 ARM) that I KNEW was extremely risky?  Because I fell into the "we are helping more people live the American Dream" mold.  I thought with enough education to the borrowers and completely explaining how the loan worked I could still sleep at night.  That's rubbish and I knew it.  I did it just like everyone else (even though most won't admit it) because it was easy and the money was good.   

I said in an earlier blog that at some point the consumer needs to take some responsibility for the loans they sign up for.  And I still believe this completely.  Consumers who bought a home they knew they couldn't afford are still responsible.  They will never win the "but my loan officer said I could afford it" argument.  The problem is / was 2 fold - Lenders shouldn't have offered a loan they knew had an enormous amount of risk layers and the consumer should have not agreed to a loan knowing there was an enormous amount of rate risk.

Hind site as they say is 20/20.  I truly hope this "market correction" re-affirms what we all knew to be true and allows us not to fall into the same trap in the future.