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Are lenders to blame or the scape-goats for the Sub-prime meltdown?

house for saleIs anyone else getting tired of the blame for the sub-prime meltdown being laid at the feet of the lenders? Sure, any lenders who lied or purposely mislead borrowers should be paying for their misdeeds. My sense is that those are few and far between.

The sub-prime market made loans available to folks who might not otherwise have been eligible. Some of those people took the risk, improved their credit and/or income levels, and refinanced into conventional mortgages. They are paying their bills and are now in control of a major asset, their home.

Some of those people took the risk, found that their income did not rise along with the reset loan payments, and found that with a drop in the market value of their home they could not sell it in time or for enough money to avoid foreclosure.

Some of those people who took a risk they could not afford did so to buy a home in the first place. Some of them refinanced into a riskier loan to cope with a loss of job or a medical disaster. Perhaps some were business owners looking for more capital to invest in their business. And some of these borrowers refinanced to buy toys…newer, nicer cars perhaps.

Whatever the use of the loan, the informed borrower took the risk. The misinformed borrower did as well. If the lender told the truth and clearly explained the risks, I just can’t understand how it is the lender’s fault.

Another post to come on other points of view…

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.