Poor Innocent Homeowners

[rose-colored-coolaid]

I've heard a lot regarding who is to blame for the mess. The owners, the lenders, or federal oversight. Most would agree that the aggregate of all three are to blame, yet homeowners often get a bit of a pass.

I don't get this. Any of the people who claim they were tricked were surely making the largest purchase of their lives. Yet they did not have the time or interest to actually read the document they were signing?

It's tax season, so let's make a comparison. Lets say I hear some guy on the radio advertising how much he can get back from the IRS. Say I paid $6k income tax last year, and got $500 back. I go talk to the guy and he tells me he can get me $4k back instead this year (he keeps 25% of it). So I give him my W2, and no other document and he fills out the paperwork. He gives me the final paperwork to mail in, and I sign it without looking to see why I am getting such an unbelievable return.

When the IRS audits me demanding proof that I donated 2/3rds of my income to charity, I doubt claiming that the slick radio guy tricked me will work and that I already spend the return means I deserver a bailout. But I don't see how this is any different than what many homeowners are claiming.

[johnsgonefishin]

This is the great United States of America where no one is responsible for their own mistakes. There is a homeowner in California who is sueing her realator for letting her buy a house for 1.1 mil when market value was hypothetically 1mil. God forbid the potential buyer does any research or attepts to negotiate.

[ira s]

For first time homebuyers in the last couple of years, whom were they supposed to turn for good information?
Real estate agents often portray themselves as helpers, not sharks, and they are supposed to have their client's best interests in mind.
I made the mistake years ago of completely trusting a real estate agent. I know better now, but a lot of homebuyers have been misled and fooled by agents and lenders...Yeah, these homebuyers should have done more research and been better educated , and of course ultimately it's their responsibility, but it seems a little heartless to let the sharks off the hook, almost like blaming the victim. He couldn't help raping her, she was wearing a short dress, it's her fault.

[Ubersalad]

shouldn't bring rape into analogy...

[ira s]

No, probably not a great analogy, but when you're feeling victimized and used, maybe it doesn't matter where the responsibility starts and ends.

[rose-colored-coolaid]

[Lake Hills Renter]

[Civil Servant]

Want to know what's really scary? Some local and regional law firms are beefing up their consumer-protection practices, waiting for legislative signals that will let them start racing forward on class-action lawsuits they've been quietly preparing on behalf of said poor innocent homeowners. One contention is that banks erred in not providing, in tabular format, a schedule of payments pre- and post-reset so that buyers could see that yes, payments will not always be so low. Another is that contracts are too long and that it's not reasonable to expect people to read and comprehend 30 pages. That's what we really need to get back on the right track here, isn't it: LOTS AND LOTS OF LAWYERS WORKING ON COMMISSION.

[rose-colored-coolaid]

I've heard the lawyers did quite well during the last depression. Why not this one as well?

[johnsgonefishin]

The Attorneys will find a way. The poor innocent home owners are going to make some shaddy high paid extortionists(Lawyers) very rich. The sad thing is, at the end of the day the homeowner will be in the same position or see very little of the money from the result of litigation. The poor innocent homeowners will have to re-live the embarrasment of not being able to afford their house the entire litigation process which can be years. Furthermore they are going to feel real stupid for all the effort when they find out that they are getting like $500.00 for it and their attorney is getting like $10,000 because of all the fees. Most companies will settle out of court to avoid the cost of full trial for like $10k.

[Big Mike 34]

Home owners find a house they love ....they go to the bank to see if the financial experts can find a way for them to buy ....they get a loan, No money down a low payment for 3 years etc...They figure their salary will continue to go up and in 3 years not problem...

The Bank surly did their due diligence checked their income, their Credit record, time on the job...Savings, money in the bank Or did they?....did the bank say to themselves no matter what happens we can't lose...Prices are going up 10% or so a year...It is a $400,000 house we will collect $25,000 a year so every year our investment is payed down and the value of the equity goes up....HOW CAN THEY LOSE....We don't need no down payment and the Feds want us to find ways to get people into new homes..and besides we can sell the loan...

Now the Homeowner is certainly partially at fault for not being more knowledgable about this high finance (and that is exactly what it is) BUT SO IS THE LENDER...

No Homeowner walks away without severe damage to there finincial and emotional health....and the lender may lose a few bucks....THAT IS THE WAY OF THINGS....

[Civil Servant]

Big Mike, I'm not disagreeing with you that many now-in-over-their-heads property owners didn't sufficiently educate themselves on matters pertaining to finance, markets, risk, etc. I just think it's specious to suggest that this lack of interest in self-education wouldn't have been a problem if lenders hadn't been so shady in the first place. Looking at What Went Wrong In The Housing Market, the domino metaphor -- and the understandable urge to point to someone as having started the fall -- is not helpful. The problem is systemic; property owners gave themselves a pass in terms of learning about the *system* they were becoming part of, each of its potential failure points and what risk to them these failures might pose. It is absolutely the job of the would-be homeowner to ask questions of him- or herself: Well, what if my salary does not go up for the next three years after all? What if I'm out of work for six months? And if the answers are not compatible with the "house they love," well, sorry, but they ought to find a different house to love. It is not the responsibility of a lender to conduct that analysis, nor should it be.

[Big Mike 34]