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Borrowers and Lenders Be

Have lending practices tightened too much… or not enough?

It’s been hard to turn on the TV or glance at a newspaper over the last year and half and not see something about the sub-prime mortgage mess. Recently a lot of the talk has moved toward blame, and there’s plenty of blame to go around. At one end were the home-buyers whose eyes were often bigger than their pocketbooks and who got in over their heads with “exploding” adjustable-rate mortgages. At the other end were the Wall Street whizzes who packaged and peddled opaque mortgage-backed securities: bundles of bad debt that didn’t get any less bad for being bundled. In the middle — there’s always someone in the middle! — were a whole raft of folks giving loans, taking cuts, and selling them further up the chain. In retrospect, everyone should have known better. But, of course, that’s easy to say now — and it’s cold comfort if you’re already facing foreclosure.

So far, Oregon has fared better than the rest of the country in the sub-prime fallout, but the foreclosures are mounting (especially around Bend). The mortgage industry says that they’ve learned from their recent excesses, and have tightened their lending practices.

But just how easy should it be to own a home? Or how hard? Have lending practices tightened too much… or not enough? How much risk is too much risk?

And what’s the best way to solve the existing, looming crisis — a solution that doesn’t reward financial ineptitude but doesn’t lead to wholesale, potentially devastating foreclosures?

mortgage foreclosure loan sub-prime

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