Why were adjustable rate mortgages (taking advantage of desperate consumers) ever allowed to exist?
How was predatory lending ever seen as good for the stability of the U.S. economy?
- 1 decade agoFavorite Answer
There used to be regulation on how high-risk mortgages were rated. Clinton and the Democrats loosened those regulations because they felt minorities weren't able to get mortgages.
Another failure of bad liberal policy that had "good" liberal intentions.
There is nothing wrong with ARMs. People who choose it assume that in 5 years or so rates would be lower then they could refi into a lower fixed rate mortgage. The issue is giving ARMs to people who have no business getting a mortgage in the first place, which I cover above.
- AstrolionLv 61 decade ago
It wasn't termed "predatory lending" when it began.
Banks are very powerful lobbyist in Washington and they have used this power to pull out all the "rules" in lending that protected consumers, all in the effort to increase profits.
They lobby in Washington saying that "high risk lending" (what we are now calling Predatory lending) allows borrowers who ordinarily might not be able to qualify for a loan, under the original more stricter underwriting guidelines, with these loosened rules are now able to obtains loans. They tell them they are providing a good service to that the public needs.
I say BS, we need good consumer protection laws that protect the public from the predators.
- Anonymous1 decade ago
I would bet that 90% of the mortgage issue is late payments, with 2 or 3 big screens in the house. Then turn around and mortgage 150% of the homes value and wonder why it can't resell to get from off and under it. I see it every day, late payments, mortgage resold to higher payment arm, payment goes from $400 to $800, around here anyway.
- Scott BLv 71 decade ago
It's this little thing you don't understand called free enterprise. Lending institutions can come up with any product they want. It is now, and always has been "buyer beware". I'm not saying these morgages are moral, but neither is the used car industry. The trick is to be a better informed buyer. The better question is why is it the federal government's job to bail out people with these mortgages?
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- question212Lv 61 decade ago
This is a good question but I think this fiasco also shows how uneducated the buyers were. Three parties were at fault here! The real estate people that didn't care if someone couldn't afford to pay as long as they got their commissions. The Banker who lent to someone that couldn't come up with down payments surely knew they couldn't keep up with a loan.
The buyers who couldn't afford a down payment thinking they could handle these big loans and not willing to wait till they could and not realizing all the other bills that come with buying a home.
- Anonymous1 decade ago
I really want someone to do a study to find out what percentage of these ARM investors were people getting in over their heads trying to flip a house and make some quick cash!
We are bailing folks out that we don't know anything about!
But, it sure makes the Democrats in Congress look like they care for the poor homeowner when they haggle over how we should bail out these poor, unfortunate folks.
I say before we throw them the money, reveal who they are!
- 1 decade ago
Many people want ARM's. In the past, people were able to time them right so their mortgage payments were less than a fixed loan.
Also, it was Clinton that changed the rules that greatly made it easier for a poor person to buy a home. He also removed most PMI insurance. (PMI protects lenders from foreclosures.) Clinton thought PMI insurance was too expensive for poor people.
- PatriciaLv 44 years ago
Yea sure ask Heather Mc Carthy that question.. And if your talking about sex I doubt a woman Would take advantage of a Drunk bloke if shes sober.. Not to say it has'nt happened though..I just dont know if it has..
- MP US ArmyLv 71 decade ago
I got an ARM for my last house and I was cool with it.
The only people who are to blame are the Lenders and those who got the loans.
If someone was tricked into a loan than the lender should be punished.
If the home owner didn't know what they were doing then they should loose their house.
NO one should be bailed out with taxpayer money.
- taterbug5252Lv 41 decade ago
They were not set up to be for uncredit worthy consumers. They are for people who plan to see within 2 years or house flippers. People just tried to get homes they couldnt afford and that was the only was to get into a home they wanted.