Monday night, Jon Stewart’s guest was former subprime mortgage company owner Richard Bitner, discussing Bitner’s book about his experience watching that industry devolve. While I don’t know Bitner’s story well enough to judge if he’s anywhere as innocent as he makes himself seem, it did bother me that the show used the same old misperception about our current mortgage crisis, starting from a presumption that the only problem is a matter of banks giving out loans to people who knew they couldn’t afford such a large loan in the first place.
I keep hearing the problem phrased as if there were a blame that should be shared between the people facing foreclosure and the banks who hold their bad loans. They both should have known better than to get into such a bad deal.
However, from what I saw in the Bay Area that wasn’t the case. For instance, in the Bay Area one problem was the “pick a payment” loan that was pitched to existing homeowners as a refinancing option. These loans were probably ones that the homeowners could afford, but they were designed to trick borrowers into increasing their debt.
As bad as the “pick a payment” loans were, however, those weren’t the only things I saw. One friend got into fights with his bank representative about how much he could afford to borrow, with the banker insisting that he could afford to shop for homes at a much higher price range than he really could. My partner and I got taken as well, as we learned we had taken a loan that typically should have gone to people who had far worse credit and offered a much smaller down payment. Our mortgage broker hid details about our loan from us and the worrisome details we did discover came at a point where we would either have to let our first home purchase fall through or take the loan. Agreeing to work with a person we were told would work to find us the best possible deal was a mistake.
Sure, you could say “Let the buyer beware” but when it comes to something like home ownership, is it okay for us to have to treat our banks the way we treat a sleazy salesperson? Should we have to learn how to become loan officers so that we know exactly what kind of mortage we should be getting before talking to any of the “experts” in the field?
I’m sure there were people who knew they were buying a big house they couldn’t afford, hoping they’d make it work before time ran out. However, I haven’t seen it happen. Meanwhile, I’ve seen plenty of cases where banks and mortgage brokers took advantage of customers’ trust. Frustratingly, that side seems to be getting a pass in the media.
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