Forbes takes a look at a group of professionals who, thus far, have escaped from the volley of criticism being leveled at subprime loan originators in the wake of the housing bubble's collapse: real estate agents.
In their quest to generate sales and commissions, some say that agents encouraged home buyers to take out loans larger than they could afford -- often subprime loans, where the unlucky homeowners now find themselves with monthly payment 30% higher than the teaser rates they were initially paying.
The exact amount of blame that should be placed on real estate agents is up for debate and, in a sense, it doesn't even matter. What caused the subprime debacle was bad incentives: aggressive loan salesmen (and perhaps agents too) being paid on commission, who often had no stake in whether the loan worked out: They got their check at closing and that was that. Then the loans were packaged into CDOs and sold to Wall Street, which scattered them among money market accounts, pension funds, hedge funds, and other vehicles. But very few of the people who made the bad loans have been, or will be, held accountable.
Until the structure of the industry changes, we will always be close to another mortgage debacle.
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Reader Comments (Page 1 of 1)
10-20-2007 @ 11:52PM
Chuck Iklodi said...
You're pinning the tail on the wrong donkey. Realtors don't have anything to do with financing any more. In Ohio, we can't ask a client anything about their finances.
10-21-2007 @ 11:43AM
Kate said...
BUYERS----It is time to be responsible for your own actions. You knew what you signed for several years ago & did nothing to prepare for this.
10-21-2007 @ 2:28AM
brettze said...
Remember the mobile home boom of 1997-98 the great repossession of 2000-200? ?? The mobile home industry had been in the tank ever since. The production plummeted 60% and never recovered for several years. Now the real estate industry is borrowing a page from mobile home industry. Everyone is running away from mobile homes to take up on subprime loans and still cant pay on time. Are they the same people who walked away from mobile homes??
10-21-2007 @ 2:46AM
Bob said...
You can put the blame on the greed of the lenders
10-21-2007 @ 8:28AM
Tim said...
In this day and age realtors/bankers job is to sell you something. They work in their own interest not yours. The person who protects your interest is you. if you can't do that God help you because in this society there's someone on every corner offering to lend you money. Massive college loans, home equity loans, weird mortgages vehicles, extended car loans, credit card etc. Just say no to the culture of debt and you'll be fine.