Who is responsible for the current mortgage/real estate crisis?
Categories: Foreclosures, Mortgage News, Real Estate News
hiThis questions was posted today at LinkedIn for debate and I thought it would be really interesting to share with all of you and get you feedback by commenting on this blog.
Who is responsible for the current mortgage/real estate crisis?
A couple wishes to buy a home. Their income is approximately $125,000 per year.
Average home prices in their area are about $605,000. After their down payment they end up with a loan of $550,000. The lender will approve them for a loan but the payment is a tight squeeze. Technically they can “afford” the mortgage but they will need to be on a very tight budget to be able to pay their other bills and won’t have much discretionary income. They fall in love with a house and think it is a great buy as there are similar homes in the area listed for more. The couple goes ahead and makes the purchase.
Fast forward a year or two and home prices have dropped significantly and the couple now finds that they really can’t afford their mortgage after all. They are falling behind on the payments and face foreclosure. Who do we blame?
a) The Real Estate Agent. She knew that the home was probably a little more than the couple could comfortably afford and should have steered them toward lower priced homes or recommended they wait until prices come down a bit or have a larger down payment.
b) The Mortgage Broker. He is the expert in the home financing field and should have discouraged the couple from this much of a loan.
c) The Lender. They are the ones who set the guidelines and ultimately approve loans for people with high debt ratios and offer the creative financing options that allow people to qualify for loans that they can’t really afford.
d) The Couple. They should have been more responsible and not rushed into homeownership because ultimately they are the ones who will lose their home and ruin their credit.
e) All of the above
f) None of the above
