The definition of predatory lending to me is bilking elderly people out of the remainder of their lifesavings - people who genuinely, by their advanced age and declining faculties, are taken advantage of.
But the vast majority of “suckers” are simply people who got greedy and couldn’t say “no” to instant gratification. When my wife and I bought our first house, not many years ago, we took a 30-yr fix at 6.0%. According to our various friends and colleagues, we were nuts for not getting an ARM at about a percentage point lower. Ultimately, to us, it wasn’t about scalping a percentage point for a few years and refinancing later on. It was about looking at an historically excellent fixed rate, with a payment we could afford, and knowing that we would never have to worry about unforseen problems in the marketplace. Knowing we would be able to sleep at night, regardless, was worth the extra point we would be paying in interest. It was simply good enough for us.
When we went to the closing, at the title office - I’ll never forget this - the Realtors and title officer sat in utter amazement as we actually READ the terms of the mortgage contract. They told us, “no one ever reads these contracts.” My wife and I were just like, “you’re kidding right?” They said they weren’t. People just sign away. I said, “So people are committing to massive amounts of debt without reading the fine print? Are people that stupid?” Their response was silence.
Just amazing. People inevitably make their own beds. A scant few are legitimately screwed by criminal elements, but too many people have their head in the clouds and got what was inevitable.
Thanks for an excellent post.
My view is that much of the rot we've seen in the economy over the last two decades is due to the disappearance of the Depression from our collective memory.
My grandparents (born 1910-1912) viewed taking on new debt with about as much enthusiasm as getting a root canal without anesthesia, and that lesson has stuck with me all my life.