I would suggest you might look in to “Predatory Lending” before you put the blame entirely on the borrowers. It might give you some insight.

There were HUGE commissions and fees for putting people in BAD loans. THAT was the “moral hazard”.

If you take a renter that doesn’t know borrowing, and offer them a home with a 125% value loan, cash out, at teaser rates for 2-4 years, less than they are paying for rent, and then promise them the soaring home prices are going to pay for it…….then it is hard to turn down.

They were literally paying people with tens of thousands of dollars in cash out to take that loan. They were also managing to talk people who had standard mortgages in to the bad subprimes because the rates were lower.

And they also were submitting false documents too, they called them “liar loans”. Add in a phony appraiser hired by the mortgage companies and you have a whole lot that isn’t the fault of the borrower.

Not everybody knows better.

Of course, I think that the people who borrow money to buy what they can’t afford are idiots.

But I also think that mortgage and credit card companies are equally to blame with the deceptive and high pressure tactics that they use to entice borrowers to borrow more.

One time I got a call for my credit card company, and they wanted to loan me money. I didn’t even ask for it. They just called out of the blue and said that they wanted to loan me money.

When I said that I didn’t need it, and that I have everything that I need, he got really upset and started questioning why I didn’t need money. Then he started to list all of the things that I could buy with the money. You should buy a new leaf blower since fall is coming up, and so on.

I couldn’t believe it, this guy was trying to shove money down my throat. Is there any wonder why this country is so messed up?

Joey Sixer made a good point. Lots of credit card companies give cards to people who are young and/or have poor credit knowing that they will likely default. However, these subprime cards are so fee and interest laden that even if/when the consumer defaults, the card issuer has still made a profit.

Also, the credit issuers are horrible about working with people who are having trouble making their payments. When I worked for a credit card company, I routinely had people calling in BEFORE they went delinquent because they wanted to make good on things before it went bad, but my company wouldn’t even discuss a payment plan until the consumer was at least 3 months past due.

It’s my experience that MOST consumers try to work something out with their creditors, but when the creditors refuse to work with them I lose all sympathy for the creditor.

While the consumers deserve their part of the blame (sometimes) for poor planning and financial savvy, the creditors deserve at least EQUAL blame for their role.

Simple, Credit card companies in particular, but not only, prey on the young,. For example: They are on college camuses and offer credit cards, teh kids get into debt, can’t pay ( heck they are not even working) but Mommy and daddy bail them out and VIOLA they get new credit cards sent unsolicited…

Why soulnd’t companies which engage in such practices get stung for the risks THEY take?

Plain and simple. We are a financially illiterate country who needs instant gratification.