Irresponsible borrowing

I've said something like this before, but it's important enough that it's still being re-stated by others. Here's what Matthew Yglesias has to say about those "irresponsible borrowers" that some are now saying should be left high and dry as the housing crisis continues:

When someone applies for a mortgage, there are two parties to the transaction. On one side of it is a teacher or a blogger or an electrician or a lawyer or a nurse or a guy who manages a Home Depot. On the side is a guy who, for a living, as a professional, works in the “deciding on what terms to offer people mortgages” business who works, for a living, at a financial services business. Businesses like that got in the habit of making loans with little regard to actual prospects for long-term payment on the theory that since house prices were rising, the borrower could always sell or refinance. That, to repeat, wasn’t the judgment of electricians and store managers; it was the judgment of people who were professional mortgage-offerers.

Keep in mind that the lender isn't simply selling a product like a double bacon cheeseburger or a Snuggie. It's a lot easier in those cases to argue that the buyer is fully responsible for their ill-advised choice.

But in the case of a mortgage, the lender is actually creating a relationship between the buyer and whomever it is that ultimately owns the loan. The lenders who lavished money on people who aren't good credit risks are the real idiots in this scenario. I mean, how smart is it to offer relaxed credit terms to people with bad enough credit to not qualify for your regular loan products? Or to offer people more money than the old rules said that they could pay back?