ArnoldCountry

Second Mortgages: Why Absolve Consumers for Stupidity?

On the flip side, the three C's of lending are alive and well, credit, capacity and collateral. These are three of the most important things the bank uses to determine if someone is going to get a loan.

Capacity is the ability to pay back the loan. Collateral is equity. Credit is the credit standing of the person borrowing.

But do not lose sight on which ones are most important... Capacity and Collateral.

You are clearly seeing today that many consumers lack the capacity and collateral to support the loan. You may make the "personal assessment" of personal responsibilty but this is business and the risk of capacity and collateral was always a known risk by the lender. They are impacted today by their risk, not deadbeat consumers. Clearly, if consumers had the collateral and capacity, this would not be an issue which is why it is always a risk for lender!

If I was a consumer in this situation, my first responsiblity would be to provide for my family.

As a consumer, I would do whatever is lawful and best for me. Here in the 9th Circuit, consumers can strip seconds lawfully in a bankruptcy. It is time for consumers to look at all options and take those that are lawful. On the flip side, lenders should do the same. This is business, not personal responsiblity.