[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?
If I rent your house while you’re on your next vacation, does the fact that the rent was high, or you didn’t clean up first, or something else, mean I can trash your house and it’s OK? The money lent out in a mortgage ultimately came from other people, and they need it all back, with a little income, just like you if you rented out your house. They are very exposed, just as you are renting out. Saying it’s OK to trash the house, or default on the loan, is going to have serious consequences on people’s future behavior.
Right now, the world is awash in savings. We can borrow like drunken sailors, and default at phenomenal rates, and it’s OK, we can still borrow more. But that’s not going to last forever. Down the road, world savings will return to normal. When that happens, do you think that people will want to lend to US homeowners? Or to a nation that thinks that it’s up to the lenders to make sure the loan is repaid?
