Maybe It's the Borrower Who is the Bad Guy?

The general media – TV especially – sometimes avoids letting the facts get in the way of a good story. Indeed, crimes of greed and stupidity were committed on Wall Street and by dozens of nonprime retail loan officers and brokers who upstreamed billions of dollars in questionable loans to Wall Street for securitization. And $2 trillion in losses later, we have ourselves a housing market that is still smoldering in the ashes. Yes, a lot of bad was done to borrowers – but what about those consumers who were party to home flipping and equity skimming schemes? And what about borrowers who believed in the Peter Pan housing market and who thought heck, based on a salary of $40,000 they really could afford that $500,000 mortgage? There has been virtually no coverage of this side of the story – until Warren Buffett opened his mouth. Buffett, who controls a chunk of Wells Fargo (which has a residential lending share of almost 30%) said in his annual Berkshire Hathaway letter to shareholders that banks were victimized by some homeowners who refinanced their loans before getting evicted. "Large numbers of people who have 'lost' their house through foreclosure have actually realized a profit because they carried out refinancings earlier that gave them cash in excess of their cost," Buffett wrote in the Feb. 25 letter.  "In these cases, the evicted homeowner was the winner, and the victim was the lender." There you have it.