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Christopher Dodd’s Subprime Answer
By JLP | September 11, 2007
The opening paragraph of this article from last week says it all:
Senate Banking Committee Chairman Christopher J. Dodd today proposed a sweeping set of changes aimed at helping high-risk borrowers deal with predatory lenders.
So it seems the entire subprime mortgage mess was due to predatory lenders. The borrowers had no responsibilty in this matter.
I’m not going to say that no funny business went on during the subprime heyday. I’m sure there were lots of brokers doing shady things to get borrowers into loans that paid better commissions. However, I have a hard time believing that borrowers were mislead to the point that they couldn’t make a sound judgement as to whether or not they could afford their mortgages. I have a feeling that most people were looking through rose-colored glasses and counting on the price of their house continuing to appreciate at a solid pace. When the mortgage reset, they could simply refinance and get another cheap loan. Its amazing what some people will sign up for when they want something bad enough.
I’m not saying that some changes don’t need to be made. They do. Brokers’ butts need to be on the line when they act unethically. The commissions on subprime loans need to be the same as commissions on other types of loans so that there’s no incentive to stear people to one loan over another. I have heard or read stories of people who qualified for better loans being steered into subprime loans because the broker earned more commissions. That’s just wrong and the broker should go to jail for that kind of behavior.
The bottom line: borrowers need to educate themselves so that they can spot when someone is trying to take advantgage of them. Notice that there’s NOTHING in Dodd’s “plan” about educating borrowers. I say MAKE first-time homebuyers take a mortgage class before they can take out a mortgage. It’s a little radical, but I bet it would help.
Remember, Dodd’s just a politician running for president. Voters don’t want to hear about personal responsibility.
Topics: Business News, Credit, Housing Market, Mortgages |