[quote=patientrenter][quote=analyst]
Lenders were/are not pushed to do anything dangerous or likely to lead to losses.

They are required only to use realistic appraisal values, and maintain appropriate loan-to-value ratios. This is easy, boring, and the path to a reasonable profit, but not the path to riches.

That is why the charlatans who engineered the real estate bubble, and are responsible for all the damage that it caused, were not satisfied with the arrangement.[/quote]

analyst, it sounds like borrowers have no responsibilities, and lenders have them all. I guess I can’t subscribe to a theory that says that the person getting the money has 0 responsibility, and the person giving the money has 100%. In a transaction where you let someone use something of yours of great value, who is more exposed to losses?[/quote]

The borrower gets no money. The money goes to the seller of the home. The borrower gets a home. If the borrower defaults, he gives up what he got, the home. The only reason the borrower is upside-down is because he was deceived about the value of the home. Yes, as with all con games, the borrowers greed plays a role in his falling for the con game. That is not a reason to consider anybody but the con artist as the main culprit.

The money, in the vast majority of cases, was not the lender’s money. It was some investor’s money, who was persuaded by various deceptions to put his money at the disposal of the operators of the real estate bubble Ponzi scheme. The lender took a percentage fee, sent the money to a safe haven, and is out of the loop, unless/until the prosecutors pursue, which is the outcome I am promoting.

In non-recourse jurisdictions, for purchase money loans to owner-occupants, the lender does have 100% of the responsibility, by law, with fair warning.