The borrower may argue that he didn’t understand what was going on and the loan officer pushed him into a bad loan.
The loan officer, however, may argue that the borrower lied on his applications so, of course, the loan was not appropriate for him.
I’ve seen different numbers. This blurb says, “About 50 percent of the subprime mortgages were ’stated income loans,’ with no verification of borrowers’ incomes.”
But then again, the loan officer probably accepted the borrower’s obviously bogus stated income to get the deal done.
So was it the loan officers and borrowers working together to take advantage of the lenders?
{ 2 comments… read them below or add one }
Michael W. 03.29.07 at 5:36 pm
The banks took advantage of lenders yes. But more so their shareholders and buyers of their notes.
I am not that old, but I still remember a day when banks actually wanted to make sure they could get paid back the money they lent and not just survive on banking fees…
But that is why there is a bubble, everyone lent out money like it was free because they thought worst case scenario they could foreclose and recoup their loan. However, this doesn’t work if everyone else has the same strategy and floods the market with credit driving up home values. As soon as the spigot is turned off, values fall and loans on these foreclosures see significant losses.
John L. Wake - Realtor 03.29.07 at 6:23 pm
Very good!
Was it the lenders taking advantage of their shareholders and buyers of their notes?