Hey, lenders, now Warren Buffet’s mad at you
It’s not been a good year for mortgage lenders. The subprime lending crisis has resulted in a wave of foreclosures. Borrowers are defaulting in record numbers on their mortgage loans. Much of the public now views mortgage professionals as little better than used-car salesmen.
And now this: Warren Buffet’s mad at them.
A story by Jonathan Stempel of Reuters said that Buffet, chief executive officer of Berkshire Hathaway and one of the richest people in the world, blasted lenders for fueling the housing crisis. Buffet did this in his annual letter to stockholders, this one a 20-page report.
Buffet blasted the lenders for weakening their mortgage-loan underwriting standards, all in the mistaken belief that housing prices would continue their meteoric rise.
Of course, we know now that housing prices weren’t going to keep rising that quickly forever.
Buffet is 100 percent right here. Mortgage lenders did screw up. They gave out too many loans to too many borrowers with low incomes, high debts and bad credit.
Of course, the lenders aren’t the only ones who screwed up during the housing boom. Borrowers got too greedy, stretching themselves financially to get that bigger house. Real estate agents were too greedy, too, encouraging buyers to overbid on houses that weren’t really worth what buyers were paying for them. Builders built too many houses, too quickly.
And let’s not forget the media. Newspapers, television shows and radio talk shows all fueled the housing craze by writing reams of overly optmistic stories. The press should have acted as a watchdog, warning overly confident buyers and investors that the real estate gains we saw weren’t sustainable.
So, Buffet has every right to blow off some steam at mortgage lenders. But he should save some of his anger for everyone else involved in the real estate mess, too.
Tags: Berkshire Hathaway, housing slump, mortgage lenders, Warren BuffetRelated Stories
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