If I may over-generalize, yours is the "city" opinion, and the OP is the "rural" opinion. There were a lot more risky loans made for cynical profit in the cities, but in rural areas, you tend to hear more sad stories about destitute grandmothers and orphans.
I feel badly for the working people who are going to be ruined by the sub-prime crash. Yes, they should have known better than to take such stupid loans, but the OP's analogy to a used-car salesman is a good one: if it weren't for consumer protection laws, there would be a lot more people who get screwed by unethical car scams. The real-estate "industry" needs more consumer protection laws.
That said, I'm severely annoyed that the smug, get-rich-quick mentality that has been promoted by agents and "investors" in the cities might be rewarded with a government bailout. For the last three years, I've watched people in Seattle (among other places), go insane with speculative greed. I've been told that real-estate never declines in value, that renters are of a lower caste, and that anyone who didn't buy into the bubble would be priced out of the market forever (a statement which is transparently mathematically ridiculous).
The number of "talking haircuts" driving around in leased Mercedes and BMWs has skyrocketed; the perception of wealth is at an all-time high. Meanwhile, landlords are evicting low-income tenants from apartments (to capitalize on the bubble with sketchy condo conversions), raising rents, and using market forces to otherwise screw people who can't stomach the idea of paying 3-4 times as much to "own" a property as to rent one. As far as I'm concerned, our society will be better off if this latter class of people go bankrupt -- if not to jail.
But I still feel for the grandmothers and orphans.
There are laws against predatory lending which are intended to protect consumers from lenders trying to take advantage of them. Obviously, they aren't good enough. In my opinion, the real problem is that lenders should never be able to profit if the consumer defaults on the loan. Without the mortgage brokers and hedge funds on the back-end buying the debt from the banks, the banks would be much less likely to issue bad loans, because they would end up getting royally shafted if the purchaser defaulted and they still "owned" the debt.
On my personal wish-list of reforms is an incredibly high (say, 90%) tax on short-term capital gains for real estate investments.
The whole justification for the mortgage interest write-off (which is otherwise just a gigantic government handout to property owners), is that it promotes home ownership, the family unit, etc. The problem is, there's no equivalent dis-incentive for short-term speculation on property, and what was intended to be an incentive for family home ownership actually helped to fuel the ponzi scheme that is effectively driving families out of their homes today.
If short-term gains on home sales were taxed at very high rates, it would basically be impossible for "investors" to flip homes for short-term profits. A huge incentive for speculative price increases in the housing market would be eliminated.
(Plus, no more stupid TV shows about house flipping. It's win-win!)
> Obviously, they aren't good enough. In my opinion, the real problem is that lenders should never be able to profit if the consumer defaults on the loan.
How do you think that lenders make money on a default?
At best, lenders break-even on forclosure. When a forclosure sells for more than the money owed, the remainder goes to the borrower, not the lender.
I feel badly for the working people who are going to be ruined by the sub-prime crash. Yes, they should have known better than to take such stupid loans, but the OP's analogy to a used-car salesman is a good one: if it weren't for consumer protection laws, there would be a lot more people who get screwed by unethical car scams. The real-estate "industry" needs more consumer protection laws.
That said, I'm severely annoyed that the smug, get-rich-quick mentality that has been promoted by agents and "investors" in the cities might be rewarded with a government bailout. For the last three years, I've watched people in Seattle (among other places), go insane with speculative greed. I've been told that real-estate never declines in value, that renters are of a lower caste, and that anyone who didn't buy into the bubble would be priced out of the market forever (a statement which is transparently mathematically ridiculous).
The number of "talking haircuts" driving around in leased Mercedes and BMWs has skyrocketed; the perception of wealth is at an all-time high. Meanwhile, landlords are evicting low-income tenants from apartments (to capitalize on the bubble with sketchy condo conversions), raising rents, and using market forces to otherwise screw people who can't stomach the idea of paying 3-4 times as much to "own" a property as to rent one. As far as I'm concerned, our society will be better off if this latter class of people go bankrupt -- if not to jail.
But I still feel for the grandmothers and orphans.