Who’s to blame for our financial crisis?

Are you sick and tired of talking about the economy, bailouts, and stimulus packages? I am too but this is one more post on it. Today I have to rant and make a confession all in one post. I understand that this is a touch subject and I may even lose some readers but I’ve held my voice for too long.

Sunday night Matt and I watched Dateline’s special on the current crisis. It actually made me sick to watch the people blame one another for the big mess. Everyone thinks they’re a victim and it was someone else’s job to regulate their actions. And yes this includes the mortgage brokers blaming underwriters and loan recipients blaming the brokers. It’s all disgusting in my opinion. If you missed the show you can learn more at the Dateline site Here.

I’d like to review the three examples they used for people who had been “scammed” by the lending industry. (Warning these number are from my memory and not exact)

The first, a woman who says she was making $1600 a month and was allowed to get a mortgage for a $200,000+ home. The monthly payment was $2,000; more than she made in a month! She said she planned to have a sister move in to help with the cost, but that wasn’t the part that floored me. I didn’t get really angry until she said it was the mortgage brokers’ job to tell her what she could afford. What!?! Why is it the brokers’ job to tell her a $2000 mortgage payment is more than a $1600 income? Whose job is it to make her budget?

The second example was a woman who had a negative income in 2006, had filed bankruptcy more than once and yet purchased multiple properties. Her loan payments were over $10,000 a month, but she says it was no big deal because she was running a successful daycare. Now don’t get me wrong NO one should have given her those loans, but she admits at one point to lying on her income and is surprised by the negative numbers in her tax figures. How do you not know what you filed on your taxes one year?

Example three was a lady who refinanced her home to send her daughter to an Ivy league school. She says she didn’t realize she was signing for an adjustable rate mortgage. She says she just trusted her loan broker to make it a fixed interest rate because it’s America and she was trusting. Whose job is it to sign and read all the loan documents? Now I know this is kind of a difficult thing, not all of us are as diligent as JD from Get Rich Slowly although, I wish I was. Matt and I did not read our whole loan document but you can bet your buttons I triple checked the interest rate and terms of our loan before signing – including what our monthly payment would be. It was our loan and payment to make not our loan broker.

Now here comes the confession part. This isn’t something we share often but I want to throw it out there…when we purchased four years ago we had a stated income loan – better known as a liar loan. Actually it gets even worse than that since our loan would be classified a Ninja loan (No income – No job). (The story gets a little more complicated but that’s for another day – this post is long enough) So why in the heck would someone give us a loan? I have honestly no idea but I’m glad they did. Four years later Matt and I are still enjoying our home. Let me take you through our story quickly. Before we decided to start looking at homes we calculated what we could afford in house payments, utilities, and other living expenses. When we were approved for the loan we pre-qualified for a huge (to us) number. By having a budget and knowing what we could pay each month we knew payments at our top price would be too much money. So we looked at houses about $40,000 less than we pre-qualified for (almost half the number we were approved for) because we had run the numbers and knew what payments for different priced homes would be – including taxes and insurance. (Never underestimate these costs).

So even though we have been hit by many outcomes we’ve been able to make it through without missing a payment. Now I’ll fully admit some was luck but a lot of it was because we knew our budget and resisted the urge to buy big. We’ve gone through an entire year in the past with either one of us unemployed but we were able to make our house payments on one income because we purchased what we could afford.

But let’s get back to our three examples. Maybe this makes me a horrible person but I don’t feel bad for either three of these woman. (And as a side note it’s funny how they were all woman – wonder if Dateline noticed that). Yes banks shouldn’t have been giving these loans out by any means but it seems to me, none of these woman took an active roll in their own financial lives. What does it say about us as Americas when we don’t take responsibility for our own finances? We have to remember that no one cares about your money more than you.

I’ll tell you who I feel bad for the people who purchased within their limits, knew their budgets and had something unexpected happen. It really is a staggering fact the number of people (including us) who are one disaster away from ruin. A job loss, hospital visit or car repair can cause people to fall behind on mortgage or credit card payments. These are the borrows I grieve for. They did everything they could to make wise choices yet are faced with difficult decisions and mounting bills. Lets stop passing the blame plate around and focus on how we can help these people.

Now I want to hear from you – what do you think?
Who is the victim? Who’s to blame? Who is responsible for making sure you can afford a monthly payment? Should banks be required by the government to independently check income figures for borrowers? I have a feeling our answers to these questions will all differ.