The B&C Blame Game: Many Victims, Many Culprits.(mortgage banks)

It was roughly a year ago that National Mortgage News broke a story about subprime wholesaler Acoustic Home Loans of California going bust because of something called loan "buybacks." At the time, the general business press didn't pick up the story or knew what it meant.

As the months passed and summer approached, I began hearing an increasing number of stories from industry executives that a "perfect storm" was approaching the subprime sector and all was not well. This perfect storm was a three-legged stool: razor-thin profits margins, delinquencies and buybacks that thinly capitalized nonprime lenders could ill afford.

Wall Street loan buyers - which had been ignoring underwriting quality for years - began cracking down on their warehouse customers who just so happened to be selling billions in loans to them. (Nice arrangement there, Wall Street.)

At first, tales of early payment defaults and buyback requests were few and far between. Then, as fall approached, all hell broke loose and we have left in front of us an industry decimated and subprime consumers losing their homes.

So, who's to blame? Let's start with the little guy, the consumer, and then work our way uphill. Yes, there are plenty of slick, snake oil salesman out there disguised as loan officers and loan brokers. But when a broker tells a subprime customer that they can buy their dream house with a stated-income payment-option ARM at a starting rate of 2%, shouldn't a bell go off in the consumer's head?

Buying a home is an emotional issue. Spouses and kids are involved and who wants to fail them? It's great to own a home, but in "the old days" buying a house always involved a downpayment and income verification. A consumer who was sold a bill of goods on a bad loan needs to ask themselves this: How did I get taken? Why didn't I ask more questions? Did I understand the loan terms and forms? Why did I not know that teaser rate of 2% would not last more than a month?

Mortgage bankers and loan brokers: What the heck were you thinking? Yes, I know it's all about selling, selling, selling and profits, profits, profits. Industry professionals - those who still ...