Quote:
Originally Posted by pauldun170
Normal people should not be offered complex mortgages.
Normal people should not be offered a mortgage unless they have a reasonable down payment and meet stringent criteria.
However, we are a capitalistic society. If institutions figure out way to make a buck by taking a little risk and offering certain products to consumers we should be supportive.
People have had it easy for so long that they have forgotten the meaning of the word risk.
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I agree about the public's view of risk. If someone wants a "safe" investment they can go down to their local bank and pick up an FDIC insured Certificate of Deposit. It will pay about .3% interest over a year or about 3 bucks for a thousand dollar investment. People want investments with a larger return with no more risk and don't understand it just isn't available.
At the same time "Wall St.'s" evaluation of risk also got way out of whack. They used flawed assumptions about the real estate market which lead them to the conclusion that there was no way to lose in mortgage lending. They found out the hard way that wasn't the case.
I do disagree with not offering complex mortgages to consumers. I believe it is incumbent on borrowers to understand the obligation they are agreeing to. If a borrower is incapable of doing so they should either get help or not sign the document. That also includes the depressing number of people who don't understand a 30 year fixed mortgage. The mortgage market shouldn't be restricted to catering to the lowest common denominator.
Quote:
Originally Posted by OneSickPsycho
Who can blame the banks for taking advantage of the system our government set up and encouraged? I can't. The banks did what was smart business to do at the time, with Uncle Sugar coaxing them along the way.
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This goes to what I was saying about "Wall St.'s" evaluation of risk. If they had stuck to risky mortgages only when they were federally insured (FHA loans) that would be one thing. Instead they offered high risk loans to everyone. The only reason "Wall St.' thought it was smart business at the time was based off some seriously messed up assumptions. If I invest in an FDIC insured CD and the bank goes under it doesn't matter because my money is insured by the government. Alternatively, if I invest in a stock thinking it can't lose, but it tanks anyway, I'm the one to blame. I hold "Wall St." to the same standard.