The "Victim" in mortgage meltdowns

I don't know if I've mentioned it here yet, but the mortgage I recently got was by far the most strenuous yet. It was more of a hassle than my first mortgage, when my credit wasn't nearly as well established, and I had far less of a down payment to offer.

I had to fax hundreds of pages of documents, bank statements, tax returns. That's par for the course, I guess, but this time, they wanted everything. With my previous loans, they would accept a summary page of my bank statements; this time, they wanted to see everything for months. There are lots of other ways this loan was different that are too numerous & boring to go into.

I really think it was different because I wasn't dealing with my lender face-to-face, but I've learned another reason why this loan might have been more difficult to obtain. For the first time, my mortgage hasn't been immediately sold to a different lender. Previously I'd deal with a small, local bank, and then find that I was sending my house payments to Washington Mutual or Wells Fargo.

This time, the bank I applied to for the loan is the same one I'm sending my mortgage payments to. It actually surprised me, and I think it explains why the loan application process was so much more rigorous.

This is part of the problem with the mortgage meltdown; a lot of people are yelling about evil lenders and irresponsible borrowers. One side thinks the borrower is the victim, the other side correctly asks why a lender would prey on a borrower in this way, when the net result is a huge financial loss to the lender. I'd suggest the lender is as much a victim here as the borrower. Perhaps the culprit is an army of middle-men, mortgage brokers whose incentive is to package as many loans as possible and sell them to big anonymous lenders. They then don't have to directly bear the consequences of their indiscriminate lending, but they are punished, because their industry is in turmoil and many of them have found themselves out of work.

That last bit, the stories we hear of mortgage companies going out of business, is the market correcting the situation. Still we'll get a government solution as well, and it'll be a disaster in the long run. In the short term, I'm left wishing I had gotten an adjustable rate mortgage this time around, since it seems likely that lenders won't be allowed to raise rates again for the rest of the decade.