Greed at root of risky lending practices

An interesting web article published recently at SeaCoastOnline.com caught my eye today: "Greed is root of mortgage crisis issue." It was written by Joe Adamaitis, president of Direct Mortgage, which offices in Portsmouth, Naugatuck, Conn. and Bradenton, Fla. Read the full article here:
http://www.seacoastonline.com/news/03212007/business-b-subprime.column.html
His premise: sub-prime lenders were greedy and took advantage of people with poor credit scores.
He writes: "If we look carefully at the problems linked to this meltdown, we might begin at the root of all fiascoes -- "greed." Sure the (lending) guidelines were loose, but so are the laws that monitor mortgage marketing and advertising to the consumer. Consumers are fed 'bait and switch' ads on a daily basis."
It is important to hear this coming from a veteran in the mortgage business.
Adamaitis continues: "One other issue that can take blame for the subprime problem is today's credit scoring models. I will say that the credit industry has it's own share of blame because the 'scoring formulas' used to rate a borrower are far from as accurate as one would like to believe."
Well said! We too believe that the people who collect and report credit information need to be held to a higher standard, and the current system needs a tune-up. Those with "bad" credit -- as determined by scoring models -- were almost forced to accept higher risk loan programs to get the home loan they were needing.
According to Adamaitis' article: "The inaccuracy pushed many borrowers away from getting conventional financing and into the subprime market. Trying to correct a credit score is virtually impossible for an individual and, therefore, has created an entirely new business."
And he leaves the reader with one chilling warning: "If you're looking for the next subprime-type fiasco, watch the number of credit repair companies that pop up."
It's bad news, but don't blame the messenger. The lending system, perhaps the whole housing bubble, was obviously driven by greed, so Joe Adamaitis' article hits the nail on the head squarely and his observations need to be considered by those who are involved in the industry, as well as consumers who are affected by the fallout of the sub-prime bankruptcies and home foreclosures.
For those working diligently to fix their own credit report, this type of article underscores the need for constant monitoring of not only one's credit report, but also the influences in the markets which lead people down primrose paths to financial disaster.
You CAN fix your own credit and you CAN reduce debt and you CAN build a financial future others will envy, but you MUST be aware that there are constant dangers, and you MUST take steps to remain cautious about things "too good to be true." Again, we recommend that you read and pass along Joe Adamaitis' article link listed above. It could help educate those you love.