Saturday, March 24, 2007

Sub-Prime Slime. An Off -Topic Rant.

My overall intent for this blog is to stick to issues of legal interest while throwing in a little humor every now and then (witness "Lawyer Joke Friday") to break up the monotony. Yes, the law CAN be somewhat boring from time to time; just pick up a law review article and tell me how fascinating it is to keep diverting your eyes back and forth between text body and footnotes ad nauseum. I THOUGHT you'd agree.

Sometimes, I feel there are issues which require a bit of venting and a dose of common sense. The recent sub-prime mortgage fiasco is one of them. The airwaves are currently filled with analysis, insights, commentary, Monday morning quarter-backing, and prognostications concerning that debacle. What disturbs me most is that the matter apparently caught a number of mortgage lenders, financiers, bankers, and stock market professionals by surprise. What the heck did they THINK was going to happen? It's a recipe for financial disaster when mortgage loans are made on the basis of 100% financing to persons whose income is merely "stated" rather than actually verified. At some point, something had to give, and it did so in a very big way. So now, foreclosures are running rampant, mortgage lenders are pulling loans from dubious borrowers who were formerly considered acceptable risks, the stock market (despite its resilience) takes a wicked tumble, and the real estate industry declines even further. The only bright spot I see in all of this is that those with excellent credit may get better deals as lenders move in a flight to quality borrowers.

Could any or all of this have been avoided? Well, let me just say that I'll bet even the whiz-kid 5th graders on television could have figured out this one.

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