Subprime meltdown

The meltdown in subprime mortgages has rolled out in a sequence of grim logic. The borrowers were interested in the loan amount and the payments in the first years only. The mortgage companies were interested in the loan fees.

Missing was someone interested in the ability of the borrower to pay. That was the old-fashioned banker, who inquired about the borrower's income, and verified it, and about the borrower's other debt, and verified that.

The old-fashioned banker is gone. He was too inclined to say no. The mortgage industry told the world it would say yes. All the borrower had to do was to say yes to adjustable rates, yes to balloon payments, yes to interest-only loans, yes to increased risk.

Monday's front-page Seattle Times story by reporter Lynda Mapes told the tale of a young couple, each of them working, who took out two loans to buy a house. The couple already had been turned down several times for a mortgage. They had no savings and they had credit-card debt.

Really, they were not ready to buy a house, and yet they would not wait. They found a mortgage company that said yes — a company so eager to make a sale that it didn't verify its own loan documents. And, of course, it did not hold the loans.

Dozens of readers responded to this story, and in different ways. Many blamed the borrowers for making such a huge commitment so lightly. Others blamed the lender for making such a huge commitment so lightly. The brilliance of the story was that it had plenty of facts to support either indictment.

Government has dealt with the subprime problem by punishing deceptive practices such as inflated appraisals and falsified income data. The state found this in its investigation of Ameriquest more than a year ago. But the $6.5 million settlement announced then was divided among 13,500 borrowers, most of whom received less than $1,000.

Fraud is at the edge of the problem. The essence is shortsightedness. That part is being cleaned up in the marketplace, and is less of a problem in the Seattle area than elsewhere. It also comes during an economic boom, for which people should be thankful.

Still, the cleanup hurts — and it would not have to hurt if more people had taken the responsibility to say no.