What I can never get over is the hubris of markets.
I remember people talking during the tech boom about how all old economic knowledge was dead and that a new economic business model with no downturns was the new norm. What a bunch of baloney.
The same is true now. Mortgage lenders talking just months ago about how the industry was self-propogating, how house flipping and exotic mortgages were the new era and as long as people could refinance there would never be a downturn again. The loan options people were being offered and taking were bizarre: interest only loans, negative amortizations, and (my personal favorite) the “pick your own payment” loans.
You can read other people’s lements on the state of the market. I’m here to place blame on the one group of people that no one else has the guts to blame: the consumers.
All I hear is how the mortgage industry misled people, the government let it happen, builders were pushing for it. All is true. But the bottom line in this entire fiasco is that consumers took these ridiculous loans without batting an eye. I was taught that when a deal seems too good to be true, it is. Companies offered this absurdity and consumers ignored this wizened proverb and grabbed for gold.
Of course, none of this matters. And you know why? Because we — the banks and brokers, the planners and agents — are going to get the blame for this mess. And the only way to get out of it is to educate, educate, and educate some more.
It is our responsibility to make sure the consumer understands the financial ramifications of the deals they are taking. That’s why products like powerOne exist, because it helps you educate your clients, making them better and smarter buyers.
The market will rebound — it always does — and it will most likely be a stronger market when it returns. The question is what are we going to do to ensure it doesn’t happen again.
Finally, someone else that puts the blame where it belongs. Mortgage Rates have been at fantastic lows, and yet that is not enough. A conventional 15 yr or 30 yr mortgage is working great for me. Interest only, ARM’s or other creative financing deals are snakes that bite, and now they are biting the people whom bought them…..
Thanks for responding, Todd. Unfortunately, there are a lot of good people getting bit over the next few months. I believe our jobs as professionals is to help our clients make the best decisions possible. If that’s the case, there are a lot of professionals out there that failed to do that, and that’s a shame. And there’s a lot of clients out there that didn’t push for it or thought easy money and that too is a shame.