I've written before about the subprime jolt and who some of the culprits are. The real estate investor, better yet the flipper, is one. He feasted early in the cycle on the rapid increase in home prices by acquiring property and then unloading it in a matter of days or weeks for a nice gain. Then he did it again, bidding the prices ever higher, until it all tanked. Has that happened before?
The Feds are another one. Several Federal agencies are charged with supervising the mortgage market and for some unexplainable reason none reacted forcefully enough when the murky clouds began gathering on the horizon. Now it's too late. The Congress is presently holding hearings on this. Let's just say that they should avoid applying overwhelming measures to correct the mess. That would just make it worse.
Now to the main attraction of this blog. The homeowner. A recent survey discovers that a surprisingly large portion of homeowners don't know what type of a mortgage they have. The exact percentage is 34. That's a lot. A mortgage is to most people the single largest debt they'll ever sign for. Shouldn't they take it more seriously than that? It's a major financial obligation. What is it? Ignorance?
It's true that the home loan market today is quite complex. There are so many different products out there that even a seasoned lender has his hands full in trying to figure out what's going on. The benefit of that diverse product selection, though, is that now the borrower can pretty much get a custom-made loan that meets his particular needs. Years ago it was only a 30-year fixed and that's it. And, there are some fast-talking loan salesmen around who won't take a no for an answer. Some also misrepresent program features just make it happen.
Still, as was mentioned before, this is a huge debt to most homeowners. More than a car loan, more than a wide screen TV loan. It's serious. In my view, they do bear partial responsibility in this subprime setback. By doing business with lenders with questionable morals. By agreeing to take on loans they didn't fully understand. Basically, this is what it boils down to, by not doing the necessary research before even looking at a house or thinking about a refinance. I think the lawyers call this due diligence.