The crash in commercial real estate completely debunks the myth of predatory lending.
In a lot of accounts of the housing bubble, predatory lending has been made to play the demon role.
Allegedly, unscrupulous non-bank mortgage shops went wild during the housing bubble, taking advantage of home buyers by putting them into mortgages they couldn’t afford.
If only regulators had been empowered to oversee these mortgage companies, journalists had paid more attention, or people had been better educated about the loans they were taking, none of this ever would have happened, according to the myth.
But the disaster in commercial real estate shows just how wrong this is. Commercial real estate loans weren’t made to unsophisticated buyers. It’s not like the people buying office parks, huge urban towers or shopping didn’t understand the terms of their loans. Yet 55 per cent of commercial commercial mortgages that will come due before 2014 are underwater.
It’s time to scrap the demonization of predatory lending. Commercial real estate proves that we can have mortgage bubbles without predators.