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THE SUBPRIME MORTGAGE MARKET MELTDOWN question) Should the borrowers (homeowners) share in the blame? If so,...

THE SUBPRIME MORTGAGE MARKET MELTDOWN
question) Should the borrowers (homeowners) share in the blame? If so, how?

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Expert Solution

There is no right or wrong answer to this question. I have presented below my view points. If you concur, please add some more meat around it and make your answer ready.

I personally believe the borrowers (homeowners) should not share in the blame. The lenders are free to do all due diligence, assessment and evaluation of a borrower before extending any credit. Lenders have the ability and tools in place to measure the credit worthiness of a borrower, his ability to pay a day, his earning power etc. Lenders, take a final call, after all kind of due diligence and documentation.

A borrower will always want a higher credit They may not be financially educated enough to understand what a credit trap is. Borrowers education is also an implicit liability of the lender. It's lenders' role to educate borrowers about credit worthiness, earning power and ability to repay the debt.

Despite all these if events of default happen, if issues like sub prime crisis take place, it's then the calculated risk of the business that every lender will have to take.

Hence, a borrower should not be expected to share the blame.

jeff jeffy answered 9 months ago
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