You may have heard about the House Bill that would allow mortgage holders to sue Wall Street for relief from mortgages that they’re not able to repay. The New York Times covered the story here. Reading this article reminded me of a conversation I had with a mortgage broker friend of mine a few days ago.
We were talking about the current state of the mortgage industry and we agreed on two points. 1) Predatory lending does exist and it has trapped a lot of people, and 2) Some consumers share in the blame for being financially irresponsible. It’s the second point that I’d like to discuss.
First of all, like I said above, there is no doubt that there were and are some shady people in the mortgage industry and any kind of reform for them would be welcome. Those who put money ahead of serving their clients are sadly all too common. But there are two sides to every deal. The broker on one end of the table and the consumer on the other. Each has responsibilities in the loan acquisition process and each should be held accountable for their actions.
I can’t make the blanket statement that every consumer is to blame. But the fact is that many people went into negotiations with one thing on their mind – what will my monthly payment be NOW. With some research, shopping, and education, many could have saved themselves from the trouble they now face. Too many are quick to blame the mortgage broker that drew them into a deal, and too few admit that they got into a home when they shouldn’t have. They knew they couldn’t afford it but the payment was great at the time. The broker told them that the rate would reset but they did it anyway because they wanted that home.
We can’t change the past but we can do something about the future. We now know that it’s absolutely necessary to be familiar with all sides of a deal before we get into it. If you are thinking about buying a home, educate yourself first as to what you know you can afford. When you go in to talk about mortgages, ask questions until you understand every little detail. It’s an exciting process and you just want to get into the house, but make absolutely sure that you know the deal inside and out.