Sunday, January 27, 2008

SOUND OFF: HOUSE POOR

In the wake of the subprime-mortgage meltdown, readers weighed in on whether it is lenders' responsibility to help keep people in their homes because they had enticed them to take on unaffordable mortgages, or if borrowers should be held accountable because they had entered into lending agreements that they should have known they couldn't repay.

Blaming the lenders: Steve Rhode, founder of The Ethical Banker website.

"This is not a balanced equation," Rhode writes. "Lenders are sophisticated businesses that have carefully crafted products in their favor. Borrowers are for the most part less sophisticated financially and more trusting."

Blaming the borrowers: Charlie Seng of Lancaster, S.C.

"Obviously it is the responsibility of the home owners to pay the mortgages they agreed by contract to pay," Seng writes. "If we continually allow persons to freely make financial decisions and then bail them out when they make foolish and unwise financial decisions, they will never learn their lessons."

Blaming both their houses: Mike Hart of Brea, Calif.

Hart's son, with a monthly income of $2,000, found himself with a condo that required $3,200 a month in payments. Hart blames the broker who knew that his son couldn't afford it, but also his son "for being stubborn and not listening to my advice."

Check out other opinions at Betting the House, or post your own by clicking on "comments" or "post a comment" below.

Jeffrey L. Seglin, author of The Right Thing: Conscience, Profit and Personal Responsibility in Today's Business and The Good, the Bad, and Your Business: Choosing Right When Ethical Dilemmas Pull You Apart, is an associate professor at Emerson College in Boston, where he teaches writing and ethics. He is also the administrator of The Right Thing, a Web log focused on ethical issues.

Do you have ethical questions that you need answered? Send them to rightthing@nytimes.com or to "The Right Thing," The New York Times Syndicate, 500 Seventh Avenue, 8th floor, New York, NY 10018. Please remember to tell me who you are, where you're from, as well as where you read the column.

c.2008 The New York Times Syndicate (Distributed by The New York Times Syndicate)

1 comment:

Carroll Straus said...

Oh, how nice it would be if the problem with the mortgage market or the solution(s) were simple.

"Houses they couldn’t afford." Sounds so simple, doesn’t it? But in the 70s a "starter" house cost 3 times the average annual salary. Now it's 7 times and both spouses have to work. That's a problem right there.

And there is clear evidence that in some cases mortgage brokers DID mislead people-- it is a fact that some went for the "yield spread premium" and put people who had good credit into the "sub prime" loans because they got paid better. Fact. Greed and dishonesty on the part of the pros. (A buyer is usually too stressed out to really have a clue what they are signing BTW.)

AND-- there is a HUGE chunk of the problem that has to do with how these loans were resold, and the fact that it got so easy to make loans that INSIDERS were faking documents and pocketing the entire loan proceeds. THAT is what started the "meltdown" -- and why it was so sudden, and why New Century went down faster than the Titanic.

So, I am sorry the answers are not so simple. Yes, people were acting foolishly in thinking it would never end, all that “up up up” of prices. But how can you blame them when Greenspan claims he didn’t get it???

I avoided the mess—but I don't feel self righteous-- I just feel fortunate.

And when will we humans start to grasp that what happens to one affects us all? Jesus said it… we seem to insist otherwise.

Time to exercise some compassion and some wisdom in assessing solutions IMHO.

Don't let the personal get in the way of the bigger picture

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