A Tale of Hypocrisy in Lending

There are tons of crazy things happening in the banking industry these days. If you've talked to a bank or mortgage broker about the possibility of a loan, line of credit, home equity loan, etc. then you know exactly what I'm talking about. There are tighter restrictions on consumers, which is not necessarily a bad thing. These restrictions aren't any tighter than they were 5-7 years ago before banks started handing out money to anybody that could sign a piece of paper- and at 100% LTV no less! The values of the properties being mortgaged were also totally inflated in a lot of areas in the United States. There should not be a case when a 3 Bedroom, 2 Bathroom, brick ranch with 2000 square feet built in 1967 should be selling for $735,000- that is unless it's sitting atop an oil field or diamond mine. So, property values were inflated and banks were making 100% loans to people on these properties.
At this same time, the Mortgage Bankers Association was purchasing a $53 Billion building in Washington, DC to serve as their new headquarters. They were growing out of their old space and were tired of leasing- they thought it would make a great investment. After all, I'm sure they knew somebody that would give them a loan : )
So, all was well, getting loans was easy, consumers were upgrading properties, and so was the Mortgage Banker's Association. THEN, there was the meltdown. Property prices began to correct and people were stuck with properties that they couldn't afford- properties that were worth less than the loan amount, and the owner(s) didn't qualify for refinancing.
These restrictions and problems for consumers getting approval aren't necessarily my concern in this entry- just the background for it- so I'll move on to my point. Consumers that were in the aforementioned situation began to analyze it, and some came to the conclusion that letting the property go into foreclosure was the best bet. They felt there was no way to overcome the lack of equity in their property, and they had to have some equity to refinance. They felt like it was a "rock and a hard place" situation, or an "up $%@t creek without a paddle," or any other cliche terms that you want to throw at it. The bottom line is that some saavy consumers figured out that it was the best move to make. Lenders weren't willing to work with consumers on adjusting the terms of their mortgage to allow them to stay in their property, and even began to pull guilt-trips on consumers who mentioned considering just letting the property go.

One of the biggest guilt-trips was when this practice of consumers letting their properties go into foreclosure started to become more widespread, and the head of the Mortgage Bankers Association released a letter to all consumers that told a big tale of how "mortgages were an obligation, and a promise to another." He went on and on about the importance of these agreements between consumers and lenders, and actually made reference to these responsibilites as "being one of the most important to the foundation of the building blocks of the American dream."
Well, things moved forward and were getting worse before they got better. So, the Mortgage Bankers Association decided to look at their own financial situation, the status of their building, it's loss in value, and inevitably decided to- YES, you guessed it- to allow it to go into foreclosure "because of a loss in equity that made the building a bad investment." They now rent a building two blocks over. They continuously refuse to comment on the move to everyone who inquires, and I guess it's like all other things, if they decline to talk about it long enough, people will start to forget about it
The hypocrisy in things - especially in big establishments like Banking never ceases to amaze...