Do you think that the banking industry is to blame, or is it a matter of individual people not being fiscally responsible?

I think it's a little of both from what I have read about. I dont pay much attention to the housing stuff, we arent in the market for a house and wont be for awhile.

i think combo, they were lending to unqualified people that is a recipe for disaster. Also people never stop and think what if the economy goes in the toilet clearly they were living solely in the now. with no thought to the future. Yes you can afford a 500K house now, but what if xxx happens. better to live below your means then over and be screwed later.

Do you think that the banking industry is to blame, or is it a matter of individual people not being fiscally responsible?

both.

i think banks shouldn't have taken on such huge risk loans.
and of course people are to blame for not paying bills!

(I say this as I just wrote a thread on being approved for our first home loan :giggle)

i think combo, they were lending to unqualified people that is a recipe for disaster. Also people never stop and think what if the economy goes in the toilet clearly they were living solely in the now. with no thought to the future. Yes you can afford a 500K house now, but what if xxx happens. better to live below your means then over and be screwed later.

:agree

Both! The banks need to stop lending money to people who can't afford it, and people need to stop living above their means. I don't think a lot of people know what goes into buying a house. You need more than a loan to buy it. You need money for repairs, insurance, etc.

It's definitely a combination of unethical lending practices on top of consumer ignorance. I feel that people should be more educated when it comes to their own finances (meaning: if you're signing loan documents and you don't understand them... ASK... or DON'T SIGN SOMETHING YOU DON'T THINK YOU CAN AFFORD)

Individuals. Just because the bank will finance your ridiculously expensive loan does not mean that you can pay it off, and it is YOUR JOB as someone BORROWING MONEY to be sure that you can and DO pay it off.

Individuals. Just because the bank will finance your ridiculously expensive loan does not mean that you can pay it off, and it is YOUR JOB as someone BORROWING MONEY to be sure that you can and DO pay it off.

Just because you qualify for a 500,000 home doesn't mean that you can afford the payments. I think the credit given was to easy but people are responsible for their own purchases.

Before my DH and I purchase a home, we want to make sure that we are getting what we need more then the want. Also, that if the interest rates go up or things start collapsing, we are prepared as much as possible.

The current home buying generation had everything handed to them to much...that caused the problems also.

Individuals. Just because the bank will finance your ridiculously expensive loan does not mean that you can pay it off, and it is YOUR JOB as someone BORROWING MONEY to be sure that you can and DO pay it off.

I TOTALLY agree. Just because someone says they will loan you 500K does not mean you can afford 500K. Individuals are responsible for making sure they get a loan within their means not buy the most expensive thing because you can, because in the end you generally can't afford it.

People need to step up and accept responsibility for themselves. Blaming the world on you money issues are not going to get you anywhere. Evalute you money situation and even if the bank says you can afford a 300,000 house does not mean you can truly afford it.

i think combo, they were lending to unqualified people that is a recipe for disaster. Also people never stop and think what if the economy goes in the toilet clearly they were living solely in the now. with no thought to the future. Yes you can afford a 500K house now, but what if xxx happens. better to live below your means then over and be screwed later.

I completely agree!

It's definitely a combination of unethical lending practices on top of consumer ignorance. I feel that people should be more educated when it comes to their own finances (meaning: if you're signing loan documents and you don't understand them... ASK... or DON'T SIGN SOMETHING YOU DON'T THINK YOU CAN AFFORD)

Agreed! I saw so many crappy loans come through the title company I worked at. People had no idea what they were getting themselves in to... who should be aiding that process though, the education of the homeowners? It can be quite confusing. I know closers aren't going to explain every single thing about the loan if the buyers don't ask.
I'm so glad I worked there a couple years, so I have a lil knowledge regarding the process.

I don't think the problem was exactly lending too much... I think people didn't understand what would happen to their interest rates, as in adjustable rates... or pre-payment penalties.

Both in many ways - the banks for lending to people who shouldn't be borrowing or borrowing more than they should. But I think the majority of blame lies with the home-owners who are very irresponsible and borrowing way too much than they need to and they KNOW it is too much. Just common sense.

I will also say that people are not always aware of ALL the issues that come with home ownership. that is also not a good combination.

Stupid people + unethical lending practices = mortgage crises.

Honestly, I'm pretty pissed that the gov't is even considering bailing irresponsible consumers out. I don't think it's fair to the rest of us who work hard to earn money and bust our asses to make ends meet..... to have our tax money go to irresponsible, uneducated people who think that there's nothing wrong with living WAY ABOVE their means.

I mean, what the hell does a young couple with no kids need a 5-bedroom house for, anyway?

A combination of the two like some others said. Bankers have the client's financial info handy, so they shouldn't have been offering huge mortgages to them. On the other hand, the buyers need to understand how much they can afford before going to see a lender. DH and I could "afford" more of a home than what we have, but we decided on a house that we could keep up with on one salary.

It was a cycle, not any one group:
Real estate agents (REA's) make more money when they sell homes that are more money. They show homes on the upper limits of what the buyers are looking for.
Appraisers make money when they get hired by REA's. So they appraise a home for as high a value as they can.
Lenders make more money when they lend out more money, and at higher rates. They pushed more risky loans, and approved loans to people who shouldn't have qualified.
Buyers have this idea that they are entitled to own a home, and renting is bad. So they let themselves get pressured into buying homes they can't afford with loans they can't afford.
The government loosened regulations of lenders, and allowed them to start offering more risky loans.
As prices rose, speculators would buy up all available inventory pre construction. These same homes would be resold a few times each time at a higher price to more speculators who expected to be able to sell them to the final homeowner at exorbatant profits.
The typical home owners couldn't find a home at an affordable price, because they had all been bought by speculators. This made them believe that the prices of homes were skyrocketing naturally, and they would be able to sell at a profit in 2-5 years, "so who needs a down payment or equity in the home."

Yes I am generalizing, but this is pretty much what happened.

I think it is both.

John's grandma owned her own title compnay for many years and had her own real estate license, too. She has told me stories about how other companies wouldn't tell their clients the full extent of the contract they were signing and then their clients ended up screwed.

But on the other hand it could be blamed on the people cause they signed something they didn't understand or they signed for something they couldn't afford.

Thankfully, between her and John's dad who also has had his real estate license in the past, and that we had personal friends of John's family doing all our paperwork, we knew what we were getting into. Granted, I was on the phone all the time asking questions. But before we signed we understood our contract.

Both are at fault in my opinion but in a 60-40 bank/borrower. The banks made it easy for people with not so good credit records buy houses that were way out of their price range. These people were thinking they could make a quick 2 year profit and it backfired horribly!!! Joe Blow buys a $500k home hoping to sell it for $800K in a few years but instead it drops to $300K now and he and the bank are SCREWED! I don't blame Joe Blow as much because I would have probably done the same because the housing market was so hot but 'd like to think I would have bought a home more within my means but Joe Blow holds part of the responsibilty for not being more frugal.

I think it's both. I think banks should be vetting people better but at the same time a lot of the responsible should fall on the people. I mean you know what the payments are going to be, you need to read your contract better, and you need to take into account the fact that your not renting anymore and insurance and repairs are expensive.

What the lending industry did was unethical. An often overlooked culprit is the builder. In my area, one huge builer was over building homes and financing them themselves. They put people in homes, so they could go out and build more. In the end, the buyer is responsible for THEIR portion. As a whole, this recession, this economy is the fault of the lenders.