The Democrats will tell you it's the Republicans. The Republicans say the Democrats are at fault. Conservatives blame liberals, liberals blame everyone. Main Street points the finger at Wall Street. Wall Street says it's the market. Everyone has a reason to point blame, but if we want to avoid disasters like this in the future, we need to find out the truth.

Who's to Blame For the Mortgage Mess?
By Brett Carlson

The Democrats will tell you it's the Republicans. The Republicans say the Democrats are at fault. Conservatives blame liberals, liberals blame everyone. Main Street points the finger at Wall Street. Wall Street says it's the market. Everyone has a reason to point blame, but if we want to avoid disasters like this in the future, we need to find out the truth.

The truth, it turns out, isn't pretty. The fact is, we are to blame. You and me. All of us. How could this be? Let us count the ways:

1. The government (who we elected) spent the last few years de-regulating the lending industry. Safeguards against questionable lending practices were removed from the system, allowing for the creation of "creative mortgage products".

2. The Federal Reserve (government again) dramatically lowered interest rates in an attempt to off-set a slumping economy. Lower rates meant cheaper loans, which did in fact help to stimulate spending. Mortgages became more affordable which drove up the demand for housing.

3. Increased demand for housing created a dramatic rise in home prices. Homeowners (that's us folks) suddenly realized that they were sitting on large amounts of equity. Easy home equity loans allowed them to tap into that money, sometimes over and over again. As long as housing prices continued to rise, refinancing your home was an easy way to print money.

4. Investment banks began to "securitize" mortgages, meaning that large numbers of loans were bundled together into an investment vehicle. This allowed the lenders to "sell off" their loans to Wall Street. Of course, once banks could walk away from the risk involved with making loans, lending standards became even more lax. Who bought these investment vehicles? Mostly mutual funds and pension plans. Who owns mutual funds and pension plans? Us.

5. With lenders so willing to grant loans, greedy mortgage brokers and loan officers began to exploit the lack of oversight. False employment information, forged documents, and strawbuyers became prolific in mortgage applications. In the past, most of this fraud would be detected by the lenders. The environment had changed, however. The politicians like to point to "predatory lending pratices" that took advantage of innocent home buyers who didn't realize that they were getting into a mortgage they ultimately could'nt afford. Really? You work at Walmart making $8.00 an hour and you didn't realize you couldn't afford a $500,000 house?

There is plenty of blame to go around. Yes, greedy politicians let us down. Yes, greedy lenders took advantage of us. Yes, greedy Wall Street firms set us up for a fall. They all helped to put the gun to our head. But we only have to look in the mirror to see who pulled the trigger.

Brett Carlson is a Certified Fraud Examiner and small business consultant in New York. He helps companies and individuals discover, reduce, and prevent fraud. He is also the editor of FraudAnswers.com, a popular website featuring news and information on fraud prevention. Visit http://www.fraudanswers.com to find more ways to prevent fraud today!

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