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Forum Post: To anyone who thinks that predatory lending is the borrower's fault

Posted 10 years ago on Oct. 31, 2011, 7:31 p.m. EST by ARod1993 (2420)
This content is user submitted and not an official statement

Say I came up to you and handed you a contract that I'd written in tiny print in continually self-referential legalese, filled it up with obscure mathematical notations, and slapped a signature space on the bottom. Say I then proceeded to inform you that the Laplacian operator of your income function is uniformly positive over the 2D vector space corresponding to income and debt, and that the value of this operator corresponds to the difference between maximum monthly payments and your minimum current income. Say that this difference meant that you could own your very own $300K home with only a couple grand down and an annual interest rate of 2%. What kind of a deal would you call that?

I'd call it a great deal, of the sort that you're not going to get from anyone but me. Two percent a year, huh? And you know what? Before we're done here, your Laplacian is high enough to qualify you for an extra special favor; we're gonna waive the first few monthly payments to help you get on your feet. Now sign here...

Wait; you believed that? You actually believed that shit? Sorry, pal; that two percent rate was just for the first year. Try twelve percent. What? You can't pay? Sorry, bud; those are the terms and I'm not gonna do jack about it. Can't pay? Fine; go ahead and pack up your bags while I get the cops.

That pitch up there? I'd call it snake oil sales and flat-out fraud. I'd further call you a complete and utter numskull worthy of public ridicule for buying it. The entire metric I based your "suitability" on is gibberish; the Laplacian operator of your pay scale is meaningless, and would ONLY be positive if the rate of growth of your pay is growing (which is flat-out crazy), and a 2D vector space composed of debt and income means absolutely nothing. Didn't you take elementary multivariable calculus in college? I thought not, given that I can smell your sorry ass halfway across the street. It was clearly your fault for signing something you couldn't understand even though you were promised a good deal and told it was a safe bet...



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[-] 0 points by EasterRising (35) 10 years ago

Damn. Any loser who signs a contract, gets money and uses the money for something they want are responsible for repaying the money.

You are a moron if you think a mortgage rate is 2%

[-] 0 points by Disgruntled1 (107) from Kula, HI 10 years ago

I dont think id sign it if it was for anything more than a 50$ a month cable contract, you lost me in the first few lines,

[-] 1 points by ARod1993 (2420) 10 years ago

That at least is a good sign, and quite frankly when I see something I don't understand on a contract or a document I puzzle it out using Google and a dictionary; for something as serious as a mortgage I'd either hire a lawyer or get in touch with a friend who does contract law. The problem is that you had a whole group of people who had neither the means to obtain assistance nor the knowledge to understand just how far out of their depth they were.

[-] 0 points by Disgruntled1 (107) from Kula, HI 10 years ago

Its that idea that build it and they will come, i can understand wanting the house, the jetskis, the nice suv, the problem is everybody was sticking those things on credit cards or loans and just went way overboard, i know i filed bankruptcy because of a business deal gone bad, still could buy a 40k truck had 3-4 credit cards etc etc, guess what, couldnt keep up with the payments, but thats my fault, it was fun while it lasted, i can imagine how it was for a lot of folks though, running close to the border then the job goes away and its all down hill. 14 million -25 million people later and we have a problem, at this point it is what it is, now we gotta fix it

[-] 0 points by jph (2652) 10 years ago

yes sub prime scam was a scam,. however it had little to do with the crash,. it was the banks chopping and bundling,. coupled with the fact that the housing prices where based on a industry created bubble!

[-] 2 points by ARod1993 (2420) 10 years ago

Here's the thing: the practice of systematically bundling, tranching, overrating, and selling these became a big-time industry. The banks realized the golden rule of Triple A; if you can churn out AAA-rated securities out of thin air then you are going to get very rich very fast. The problem was that the bubble the banks created still required a continual influx of mortgages in order to keep the gravy train going.

That's where predatory lending of the type I described above comes in. When you run out of traditionally creditworthy prime borrowers, the only place to go is down. Not only do you relax standards, you aggressively push people who weren't financially solvent enough to take on long-term debt like a mortgage into doing just that, and at damn near usurious rates at that. Sure, you and I will be leery of signing anything we don't fully understand, but when a fundamentally trusting person gets told by the traditional gatekeeper of credit that he's qualified for the home of his dreams and that by all standards such approval perfectly normal for him he's going to assume that nobody would lend to him if they didn't think he could handle it. And that's where the subprime scam comes from.

[-] 0 points by jph (2652) 10 years ago

exactly,. the housing bubble needed a whole wider layer added to its pyramid structure continuously., this is why all pyramid scams eventually fail,. the bottom can not be maintained,.

[-] 0 points by Tryagain (300) 10 years ago

It simply isn't possible to have a system that's "you" proof.

Maybe we need to start a Bureau of Big Decisions. If you do something big or permanent, you'd have to have your government nanny sign off on it first. Sounds great, huh?

[-] 0 points by hchc (3297) from Tampa, FL 10 years ago

The people are to blame too. No way Im signing a piece of paper worth 200,000 before my lawyer reads it..

[-] 1 points by jph (2652) 10 years ago

lol, your lawyer,. .

[-] 0 points by hchc (3297) from Tampa, FL 10 years ago

Would you?

[-] 0 points by SamuelAdams (119) 10 years ago

South Park - The Humancentipad - "It didn't read it!"

Glad the only debt I have is student loans... still. But it's not the buyer nor the lenders fault entirely, it takes two to tango. They are both at fault. The lender for knowing they may be fucking that person but doing it anyways and not explaining the details, and the debtor for getting into something they didn't understand while never thinking "if it sounds to good to be true... it probably is."

[-] 0 points by happybanker (766) 10 years ago

You have a point but are people really too lazy to shop around and compare ? If something looks too good to be true, wouldn't you do a little research ? Really?

[-] 0 points by Misguided (373) 10 years ago

If you don't understand don't sign. What's so hard about that?

[-] 0 points by RicoSuave (218) 10 years ago

Anyone who buys property without hiring a lawyer is an idiot.

Predatory lending in the housing market IS ALWAYS the buyers fault.

If you can't afford a lawyer to represent you in the purchase process, you can't afford the property.

[-] 0 points by Uriah (218) 10 years ago

Bingo. I know several people that lost their homes by getting an adjustable rate that adjusted way up. Now, you'd think a few points higher wouldn't amount to much, but it can be several hundred dollars a month.

I had a fixed rate, while not as long, never went up either.

A decent lawyer can save your butt big time when buying a home.

[-] -1 points by gr57 (457) 10 years ago

If you don't read and understand something, I don't care how small the print is, it's your fault. You shouldn't sign anything that you don;t know everything about.

[-] -1 points by USCitizenVoter (720) 10 years ago

What happened to the 1,200 sq ft houses of the 1930-1960. USA houses are over priced. WHY? The so called shortage of lumber and building materials that affected the builders price. MAYBE the local developers demands to building certain priced homes within a sub division offering new homes that were way above $200,000. Maybe these home were never affordable for the average buyer. Just keeping up with the JONES

[-] -1 points by hillary (252) 10 years ago

Awwwwww somebody wants a handout....... FACEPALM

[-] -1 points by harry2 (113) 10 years ago

Its no question we need a class action lawsuit against the wall street lawyers and mortgage institutions and the fed.

[-] -1 points by Frankie (733) 10 years ago

Sorry, the predatory lending thing is mostly a red herring. Yes there was predatory lending but on a relative basis it represents a very small number in the scheme of things. Most of the people who got in over their heads simply bought more house than they really could afford wiith the expectation that prices would continue to go up including many who were speculating. Among other stats, just look at where the bulk of problem loans are. CA, NV, AZ, FL... all places where speculation was booming. MI, IN, and OH also were fairly hard hit but that's more due to job loss than problems with their mortgages per se.

[-] 0 points by OurTimes2011 (377) from Arlington, VA 10 years ago

Wrong. There were not enough speculators to cause a GLOBAL crisis. Wall Street created fictional make believe products (cds, cdo's, etc.) that crashed the GLOBAL economy.

The speculators were the banks themselves, not the borrowers.

[-] -1 points by Frankie (733) 10 years ago

Uh wrong. That's a related but entirely different subject than that of the OP's post.

[-] 1 points by OurTimes2011 (377) from Arlington, VA 10 years ago

You really have no clue. This is fraud, period. The fact that I "bot it" is irrelevant and a dodge. I bot it because of the implied obligation the seller had to tell the truth at the time of purchase. This is illegal and unethical behaviour. Period. You can try to justify it, but it is no better than a lying and cheating businessman, wife, politician, drug dealer. And it is illegal.

The reason banks are given the special regard is due to deposit insurance they are granted and paid for by the public. The fact that banks pay a small insurance fee is irrelevant. Anything big goes down, the feds are gonna step in.

[-] 0 points by Frankie (733) 10 years ago

lol. No, you're off-topic. If you want to talk about how people speculated on mortgage derivatives, that's fine. But that's a different subject versus the type of predatory lending that the OP was addressing. Read the post.

[-] 0 points by jph (2652) 10 years ago

no, that IS what happened,. it is not "wrong",.