There’s plenty of blame to go around. The realty agents, the mortgage brokers, the appraisers, the lending institutions and the government who is charged with regulating them have all succumbed to greed. Lest we forget, many of these buyers are not so pure, either.
“You can’t cheat an honest man”.
I have personally seen a lot of deals where almost every party involved in the transaction is being dishonest, and that includes the borrower. You can’t get an $800k CLTV mortgage on your $70k salary without doing something dishonest.
Ironically, I think the group that shares the least “blame” for our current trends are the realty agents. Their job is to be an advocate, which by definition means playing up the positive and playing down the negative. Their compensation is directly tied to the amount of the sale price, so it would not be inaccurate to say that the way the system is set up their loyalty is ultimately to the deal rather than to any of the principals. The only reasons they have for being at all concerned for their clients’ interests are because of legal liability and in order to garner more deals through repeat and referral business.
When times are good, neither of those two controls are of significance. There are lots of easy deals going around, and a rising market will cover all manner of sins that would make them vulnerable to legal liability. So except for any outright lies they may have told whilst advocating for their deals, they haven’t really done anything but facilitate the sellers’ greed.
The lies that it takes to do one of these outrageous deals generally get told by other people, starting with the buyer and including the mortgage originator and the appraiser and the loan underwriter. Inasmuch as the sole obligation of the appraiser and the underwriter is to observe and report the truth, and because they are the only ones whose compensation is not tied to the amount of the deal, it is their lies that do the most damage.
