President George W. Bush's plan to salvage the lives of many Americans who were talked into making home loans that they couldn't support, is very worthy if that is all that's available.
However, what angers me is that through this plan, those who introduced and funded those predatory loans will apparently not have to suffer the consequences. The American tax payer will have to take up the slack.
Any lender who couldn't predict this outcome from the very beginning was not qualified to make loans for their investors.
What are the lessons?
- Offer people money with no immediate responsibility for payback, and a high percentage will take you up on it.
- Credit scores with little attention spent verifying assets, income, work history and income reported to the IRS for at least three consecutive years is a totally incorrect way to analyze credit and make loans.
- Lending large sums of money to people with no or insufficient savings is destined for failure in a large percentage of the instances.
- Lenders need to be held responsible for poor underwriting.
