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> Stupid people getting loans they couldn’t afford. > loans to stupid people, Ah so it's (partly) the people's fault now? So when a banker shows up and offers

> Stupid people getting loans they couldn’t afford. > loans to stupid people, Ah so it's (partly) the people's fault now? So when a banker shows up and offers a mortgage to a struggling family (which they can't afford), it's their fault for accepting it! I mean how could the banker ever have known? It's not like his job involves assessing these risks or anything.

icelancer 8y ago
It is not NOT their fault. It is mostly the industry's fault, I agree with you. But people borrowing beyond their means is not 0% their fault.
richardknop 8y ago
Yes it is partly their fault. Contrast people without sufficient income, who took huge mortgages with almost zero deposit and repayment amount too high for their income, to fiscally responsible people who didn't participate in the mortgage frenzy, instead trying to save more to afford bigger deposit / smaller mortgage in the future. The first group of people was bailed out by the second group partially. This is quite unjust.
- josefresco 8y ago
  I took a reasonable mortgage that my wife and I could afford, paid a standard 20% down payment and saw the "value" of my first home drop 50% post 2008. Am I stupid? Was that my fault? The "boogeyman" borrower who borrowed millions, made no down payment and had 0 income rarely exists.
  - richardknop 8y ago
    You took a risk. Taking a mortgage is not risk free. Prices of properties are not guaranteed to go up forever. We are in fact in huge housing bubble. Some people just rent. It’s not right to force renters to bail out people who took mortgages. Once this bubble bursts I hope we are not going to be bailing out mortgages again.
  - richardknop 8y ago
    Personally I think 20% is a small deposit but better than what a lot of people are getting away with these days. You’re still taking a massive loan that you will be paying off for decades. You should only do such risk if you are ok with the property losing value. E.g. Only people buying their first house for family should ever take a mortgage if they have decided to live in that place for next 20-30 years. People buying second or third homes or flipping houses should be burned in mortgage crises, not bailed out, that’s immoral.
  - matwood 8y ago
    > saw the "value" of my first home drop 50% post 2008. So what? Not every investment goes up, and even those that do go up rarely do so linearly. As far as your situation is concerned, who cares if the value dropped 50%. You were smart, bought something you could afford (presumably on a fixed rate), and just kept making the payments. Over the long term prices would come back. The problem came in with people buying houses they could clearly not afford, and with no cushion for any downturn. They were not boogeyman borrowers, and were very common in places like Florida and Las Vegas. People who could only afford the teaser rate payment on a 3/1 ARM when fixed rates were at historic lows. Not a smart financial move on their part.
- Jackmc1047 8y ago
  Your comment is simply saying: contrast people who participated in the real estate bubble with responsible people who did not. I agree that the second group suffered because of the first and that this is unjust. Whether we can expect people generally to not participate in market manias to avoid such a predicament, is another question.
  - azeotropic 8y ago
    If we keep making the maniacs whole after every crisis they cause, they'll never need to learn to avoid these predicaments.
Jackmc1047 8y ago
The problem wasn't so much that people took/were given loans they couldn't afford. Default rates fell for many years along with lending standards (not requiring a job, assets, or income for a loan became common). Continuous rapidly rising home prices kept defaults low. Believing home prices would always rise (at some minimum rate) made it rational for borrowers and lenders engage in this behavior. To argue they were being irrational, you'd have to show that it was irrational for them to believe in the myth that this trend would never end, which is tantamount to expecting markets to not experience manias or bubbles.
hueving 8y ago
Yes, people do have responsibility for their own finances. We blame people for mindlessly speculating in cryptocurrencies, there is no reason to not do the same when they take on an adjustable rate mortgage that takes 3/4 of the family income to pay. Nobody struggling needs to buy a house. That's what renting is for.
- blub 8y ago
  It's literally one of the main jobs of the bank to make sure that it can get back the money that it lends! A family borrowing too much is their problem, banks not doing their jobs is a national problem which should not be rewarded by bailouts, but by jail time and bankruptcies.
  - avar 8y ago
    Whether the bank can get its money back and whether you can pay for the mortgage are different things. It's not credit card debt, even if you go bankrupt the bank can still collect the debt by evicting you. So it's not the same as loaning someone money for consumables. Banks price foreclosure and delinquency rates into their interest rates. In 2007/2008 this didn't work because the banks themselves were over-leveraged. But it doesn't change the fundamental aspect of this that a bank can be quite happy to give you a loan you don't have a high chance of paying back. If they charge you high enough interest rates it's free money for them.
    - perfunctory 8y ago
      > a bank can be quite happy to give you a loan you don't have a high chance of paying back This is only true under assumption that house prices won't decline.
      - pas 8y ago
        Or if they can offload the risk. As they did.
      - expressquest 8y ago
sonnyblarney 8y ago
"Ah so it's (partly) the people's fault now?" Yes, it's absolutely partly the people's fault. There were tons of people taking massive loans they should not have. People cannot abnegate personal responsibility there. A lot of things had to go wrong in the banking system for the crash to happen, but that was one of them.
- vernie 8y ago
  You know, if you really think about it, the banks were victimized by these cunning idiots.
  - matwood 8y ago
    No one said that at all. The point is that there was plenty of greed to go around. I watched multiple friends get caught up in the hype. They called me stupid for not taking on a huge loan because "housing only goes up" or "you'll never be able to afford a house if you don't buy it right now" or "I'm going to sell this in a year for 100k profit". My thought was always I have a good job in software making way above the median income, and I can't comfortably afford a house. There is no way this can continue. It lasted much much longer than I would have guessed though.
  - sonnyblarney 8y ago
    No, that's not what anyone, even the OP is saying. People were taking massive mortgages, far beyond their means, they were buying several houses renting them out. They were knowingly falsifying information they provided to the banks etc. etc.. Not all banks were doing dirty things, and not all people were doing things, but many banks were and so were many individuals, and so the rest of us pay the price. This crisis is truly an American style crises - people in most other countries are hugely risk averse when it comes to this kind of stuff. Even buying cars on payments is a newer thing in some advanced countries ie Spain. Not just attitudes though ... 'bankruptcy' is a survivable event for companies and individuals in America. Less so elsewhere.
    - blub 8y ago

icelancer 8y ago

It is not NOT their fault. It is mostly the industry's fault, I agree with you. But people borrowing beyond their means is not 0% their fault.

richardknop 8y ago

Yes it is partly their fault. Contrast people without sufficient income, who took huge mortgages with almost zero deposit and repayment amount too high for their income, to fiscally responsible people who didn't participate in the mortgage frenzy, instead trying to save more to afford bigger deposit / smaller mortgage in the future. The first group of people was bailed out by the second group partially. This is quite unjust.

josefresco 8y ago
I took a reasonable mortgage that my wife and I could afford, paid a standard 20% down payment and saw the "value" of my first home drop 50% post 2008. Am I stupid? Was that my fault? The "boogeyman" borrower who borrowed millions, made no down payment and had 0 income rarely exists.
- richardknop 8y ago
  You took a risk. Taking a mortgage is not risk free. Prices of properties are not guaranteed to go up forever. We are in fact in huge housing bubble. Some people just rent. It’s not right to force renters to bail out people who took mortgages. Once this bubble bursts I hope we are not going to be bailing out mortgages again.
- richardknop 8y ago
  Personally I think 20% is a small deposit but better than what a lot of people are getting away with these days. You’re still taking a massive loan that you will be paying off for decades. You should only do such risk if you are ok with the property losing value. E.g. Only people buying their first house for family should ever take a mortgage if they have decided to live in that place for next 20-30 years. People buying second or third homes or flipping houses should be burned in mortgage crises, not bailed out, that’s immoral.
- matwood 8y ago
  > saw the "value" of my first home drop 50% post 2008. So what? Not every investment goes up, and even those that do go up rarely do so linearly. As far as your situation is concerned, who cares if the value dropped 50%. You were smart, bought something you could afford (presumably on a fixed rate), and just kept making the payments. Over the long term prices would come back. The problem came in with people buying houses they could clearly not afford, and with no cushion for any downturn. They were not boogeyman borrowers, and were very common in places like Florida and Las Vegas. People who could only afford the teaser rate payment on a 3/1 ARM when fixed rates were at historic lows. Not a smart financial move on their part.
Jackmc1047 8y ago
Your comment is simply saying: contrast people who participated in the real estate bubble with responsible people who did not. I agree that the second group suffered because of the first and that this is unjust. Whether we can expect people generally to not participate in market manias to avoid such a predicament, is another question.
- azeotropic 8y ago
  If we keep making the maniacs whole after every crisis they cause, they'll never need to learn to avoid these predicaments.

Jackmc1047 8y ago

The problem wasn't so much that people took/were given loans they couldn't afford. Default rates fell for many years along with lending standards (not requiring a job, assets, or income for a loan became common). Continuous rapidly rising home prices kept defaults low. Believing home prices would always rise (at some minimum rate) made it rational for borrowers and lenders engage in this behavior. To argue they were being irrational, you'd have to show that it was irrational for them to believe in the myth that this trend would never end, which is tantamount to expecting markets to not experience manias or bubbles.

hueving 8y ago

Yes, people do have responsibility for their own finances. We blame people for mindlessly speculating in cryptocurrencies, there is no reason to not do the same when they take on an adjustable rate mortgage that takes 3/4 of the family income to pay. Nobody struggling needs to buy a house. That's what renting is for.

blub 8y ago
It's literally one of the main jobs of the bank to make sure that it can get back the money that it lends! A family borrowing too much is their problem, banks not doing their jobs is a national problem which should not be rewarded by bailouts, but by jail time and bankruptcies.
- avar 8y ago
  Whether the bank can get its money back and whether you can pay for the mortgage are different things. It's not credit card debt, even if you go bankrupt the bank can still collect the debt by evicting you. So it's not the same as loaning someone money for consumables. Banks price foreclosure and delinquency rates into their interest rates. In 2007/2008 this didn't work because the banks themselves were over-leveraged. But it doesn't change the fundamental aspect of this that a bank can be quite happy to give you a loan you don't have a high chance of paying back. If they charge you high enough interest rates it's free money for them.
  - perfunctory 8y ago
    > a bank can be quite happy to give you a loan you don't have a high chance of paying back This is only true under assumption that house prices won't decline.
    - pas 8y ago
      Or if they can offload the risk. As they did.
    - expressquest 8y ago

sonnyblarney 8y ago

"Ah so it's (partly) the people's fault now?" Yes, it's absolutely partly the people's fault. There were tons of people taking massive loans they should not have. People cannot abnegate personal responsibility there. A lot of things had to go wrong in the banking system for the crash to happen, but that was one of them.

vernie 8y ago
You know, if you really think about it, the banks were victimized by these cunning idiots.
- matwood 8y ago
  No one said that at all. The point is that there was plenty of greed to go around. I watched multiple friends get caught up in the hype. They called me stupid for not taking on a huge loan because "housing only goes up" or "you'll never be able to afford a house if you don't buy it right now" or "I'm going to sell this in a year for 100k profit". My thought was always I have a good job in software making way above the median income, and I can't comfortably afford a house. There is no way this can continue. It lasted much much longer than I would have guessed though.
- sonnyblarney 8y ago
  No, that's not what anyone, even the OP is saying. People were taking massive mortgages, far beyond their means, they were buying several houses renting them out. They were knowingly falsifying information they provided to the banks etc. etc.. Not all banks were doing dirty things, and not all people were doing things, but many banks were and so were many individuals, and so the rest of us pay the price. This crisis is truly an American style crises - people in most other countries are hugely risk averse when it comes to this kind of stuff. Even buying cars on payments is a newer thing in some advanced countries ie Spain. Not just attitudes though ... 'bankruptcy' is a survivable event for companies and individuals in America. Less so elsewhere.
  - blub 8y ago