No Innocents In this Mess

LIVING THE AMERICAN NIGHTMARE / FORECLOSURES ON THE RISE: As the housing market softens, a combination of consumer naivete and aggressive lending means owners with subprime loans are increasingly getting sucked down a financial black hole

To many people in the affluent Bay Area, losing a home to foreclosure sounds like a Depression-era relic or a Rust Belt phenomenon. Our real estate prices have defied gravity for so long; our job market is so strong; our cachet as a place to live seems so obvious. How could foreclosures happen here?

But in recent months, the Bay Area has proven to be home to numerous victims of the subprime loan debacle. Just like elsewhere in the country, people here with tarnished credit or limited funds bought houses that proved to be beyond their means, often putting little or no money down, and borrowing money through exotic, expensive loans that were virtual time bombs set to soar to unaffordable levels after an introductory period.

Aggressive mortgage brokers, voracious lenders and naive consumers combined to create an unstable situation.

I understand the sort of story the Chron is trying to present here: basically, it boils down to evil capitalist lenders, brokers, and real estate salesman victimizing the helpless little guy.

But what about this guy?

Cil told the broker he could only afford $2,200 a month. He makes $2,600 a month as a painter for the Berkeley Unified School District, but is accustomed to picking up extra jobs to supplement his income so he figured he could stretch for a bit.

...Cil bought a three-bedroom home in Vallejo for $450,000 with no down payment. The mortgage brokerage acted as his real estate agent. He said he was told his monthly payments would be $2,600 a month. The day he signed the loan papers, he found out the payments would be $2,900 a month, not including taxes and insurance.

He was told his mortgage payment alone would equal his entire take-home pay, and he went ahead and signed anyway. Doesn't he bear any responsibility at all?

Everybody professionally connected with the looming real estate debacle is going to be vilified except the "poor, innocent" buyers. But I think we have to admit to some culpability in that area, as well.

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[Source: The San Francisco Real Estate Blog]