posted on Jun, 19 2008 @ 11:53 AM
Great post jsobecky.
I place a little less blame on the borrowers, and here is my reasoning.
Finance is fairly complicated in terms of the math, the contracts can be long, the calculations that are done can be confusing, particularly to
someone who doesnt have a background in finance. The contracts, and the calculations CAN be explained in very simple terms to someone, and they
generally are, however, in this translation from the complex to the simple and easy to understand there is a lot of room for the person doing the
translating to spin the interpretation.
The lay person, generally speaking, has to trust that the person doing the explaining both knows what they are doing, and is not deliberating lying to
them or misleading them. In the past, banks actually carried the loans themselves, (rather than quickly sell them to other financial institutions)
and so the banks and other lenders had a vested interest in making damn sure the borrower wasnt getting in over their head. In the past, you could
trust your lender to give you a pretty fair (in fact very conservative) idea what you could afford, and for years, that is exactly what people did.
They trusted the professionals to tell them what they could and could not afford.
Admittedly, it would be ideal if all homeowners had a sold grasp of both math and finance, this simply isnt the case. Especially in the group of
borrowers who are having the biggest problems now, they are in large at the very low end of the ability to be in a home at all, and are less likely to
have great financial skill. So, while ideally they WOULD have known better, this knowing better isnt the case with a lot of things associated with
home ownership. It would be ideal, for instance, if all homeowners also had a solid grasp of plumbing, but they dont. When a professional plumber
tells you that you need some work done, you trust that person to know what they are doing, and that they are not just flat out lying to you. Same
with doctors, same with electricians, same with any professional for the most part.
Some degree of trust is necessary when dealing with professionals who specialize in areas the average person knows little about. I dont blame the
patient if a doctor tell them they have a certain disease, shows them bogus test results, and then fleeces them with false treatments. Most of us
agree that that doctor should be prosecuted. I say it is no different with financial advisor's and lenders. The fault lies with the unethical
professional, not the lay person who trusts them.