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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Broken_Clock who wrote (51344)	1/25/2006 1:35:09 PM
From: GraceZ	Read Replies (1) of 110194

If a lender can con an ignorant dufus into a no doc 106% ARM and make a $15k payday while he/she is at it...what's the problem? There isn't a problem. One is selling a service, the other is buying it. It's a voluntary transaction that neither is compelled to agree to unless they believe they will be better off afterwards. If you think there is a problem, then you are making two mistakes. First off you assume that the lender knows more about the future value of the house and the future value of the money he is lending than the person taking out the loan to buy the house. Second, you are assuming that the person who remains a renter, paying the market rate of the rental unit, rather than borrowing and buying a house will actually pay less for the use of the house in the long run and be better off than the "ignorant dufus" taking out the no doc 106% ARM. Those two things can't be known in advance by either dufus, the lender or borrower.

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