I believe that the consumers who took out loans that they could not afford are to blame for the subprime mortgage crisis because consumers should not live beyond their means. Even if you are approved for a loan that is, say, $300,000, you should not take it if you have any concerns on if you are going to be able to make the payment or not.
Proper research and planning are always the key to smart decisions. There are multiple kinds of loans, and lending establishments with better options and higher support for their clients. There will always be those who are out to take advantage of current situations.
Of course the loan companies have some responsibility for this fiasco, but individuals must take responsibility also. People obviously knew they wouldn't be able to pay off this mortgage if it were a fixed rate, so they were hoping to slip under the radar and get mortgages with small initial payments. People can't be duped like this unless they're willing.
The consumers who took out these adjustable-rate home loans knew that their payments were going to change in the future and acted irresponsibly when signing these deals. I believe that one should not take such financial risks and buy something he/she cannot afford. Greed and irresponsibility are not current trends we should overlook and excuse.
If you can't pay it, then why did you take it out? All you're doing is affecting the economy in a negative way. I am sick of hearing people give excuse after excuse about how they can't get jobs. YES YOU CAN. It might not be the kind of work that you'd like to be doing, but you can get a job.
The majority of consumers who took out subprime mortgages did so because it allowed to get a house that they otherwise would not be able to afford. The mortgage lenders made it quite clear that the payments would likely go up. Buying a home is a major responsibility and if you are going to put your money into something so important than you need to read and understand what you are getting yourself into. Common sense says that buying a house that is tens of thousands over what you would be approved for otherwise is going to come back to bite you. These lenders let the idea of getting what they wanted right then to overcome the practical reality that the payments were going to go up.
Many different people and entities deserve significant amounts of blame for the sub-prime mortgage crisis. But the primary blame should be placed on the state and federal lawmakers who mandated that sub prime mortgages be made in the first place. Prior to those laws, sub prime mortgages were rarely offered because, as history proved, they were terrible credit risks for lenders.
They are partially to blame for doing something so risky and idiotic but its the banks who approved these loans in the first place who really are the ones who screwed us over.
In a sense, the sub-prime mortgage crisis rested upon a mutated American dream. Originally, the American dream was more about the opportunity to make your way in the world as you saw fit. Eventually, the American dream turned into simple home-ownership. This idea boiled over when the government decided to encourage banks to offer loans to borrowers who had terrible credit ratings. The government thought it was seeing that everyone could achieve the "American dream," and mortgage lenders thought they were safe. The Adjustable Rate Mortgage spelled the downfall of the housing bubble. People began defaulting at dramatic rates and foreclosures skyrocketed. While a failure to live up to a contract was partly to blame for the sub-prime mortgage crisis, misplaced intentions and greed were ultimately at fault.
The NINA (no income no asset) loans where the homeowner expects to be able to get a home equity loan to make the payments until the home increases in value enough to sell it for a profit is the major problem behind the subprime mortgage mess. The mortgage companies and banks found a profitable line of business that was encouraged by the federal government and sold groups of mortgages to others. These investments had major problems when homeowners fell behind on the payments and no mortgage backed securities were worth the original investment. What a mess!
The people who took out the loans were enabled by bankers and lending agencies who approved loans with terms that they knew might cause problems several years down the road. Many of the loans were then sold to other entities that took a chance on these risky investments. The ability to sell these loans provided the perfect cover, I think, for the banking industry, which I think deserves most of the blame for the subprime mortgage crisis.
When it comes to the mortgage crisis, everyone involved is equally to blame. This includes the mortgage companies who gave out mortgages to people who they knew where not able to afford it, the representatives that worked with the people to get them the loan, and the people who took out the mortgage knowing full well that the rate could change in a few years to a rate that they would not be able to afford. It was a gamble for all, and all ended up losing.
When the banks gave the sub-prime loans, they knew that the people were going to have a tough time paying on them, and they gave out the loans anyway. The banks are to blame for that; they could have said no but the were greedy and said yes to the loan instead.
No, consumers who took out adjustable-rate home loans are not primarily to blame for the subprime mortgage crisis because the government implemented programs and pressured banks to make loans to borrowers everyone knew would not be able to repay those loans; so the government should take primary responsibility for the loans that were given out.
The average consumer relies primarily upon the advice of their mortgage broker when signing a loan. After all, they know that, in principle, the bank will want a return on their investment. So they trust that, while the broker is getting them a good rate, they are not signing them into a loan which is impossible for them to repay. It is the broker who carries the knowledge and training which should have stopped bad loans before they were signed.
There is no doubt that that consumers who took out adjustable-rate home loans are culpable for the subprime crisis. But they are not primarily to blame. The main problem is that banks re-package and sell the mortgages as mortgage-backed securities, so the investors ultimately holding the risk are not the ones who initially evaluated the risk. When banks provided loans to their communities and then paid the price if those loans went bad, there was more incentive to carefully evaluate the risk. Now the banks can easily sell the risk to someone else, so there is less incentive for the bank to carefully do the homework.