Is it Fair That Good Borrowers Are Being Punished for the Bad Deeds of Others?

This is a rush transcript from "Your World with Neil Cavuto," August 22, 2007. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Well, call it the subprime spillover, banks raising rates on credit cards, clamping down on everything from home equity to auto loans. Now good borrowers are being pushed and punished for others' bad deeds. Is that fair?

Let's ask Dave Ramsey. Dave is the host of "The Dave Ramsey Show."

It does seem a little unfair, doesn't it, Dave?

DAVE RAMSEY, FOUNDER & PRESIDENT, THE LAMPO GROUP, INC.: Well, it is unfair, but it is not happening that much, not as much as some of the news reports are saying.

I have been taking calls and e-mails all day long from lenders and from our borrowers all across America, asking this very question. And we are not seeing a credit crunch on credit-worthy borrowers. And we're not seeing big interest rate spikes.

CAVUTO: All right.

There is a fear, though, that we are seeing it in key regions where they — you had a great deal of vulnerability, in Philadelphia, the New York metropolitan area, that loans that used to go through easily or — or very low interest rate loans on auto and related loans that used to go through without any problem, are now being more scrutinized.

Is this a case of the sins of the few affecting the borrowing of the many?

RAMSEY: Well, again, you know, that may be happening in metropolitan New York, or it may not be. Yes, it would be, if that is the case.

But I think what is really happening here is that subprime loans, whether they are auto loans or mortgage loans, these are loans that should not have been made in the first place. These are not credit-worthy borrowers. These are greedy bankers trying to take advantage of people down on their luck and who are behind on their bills. They charge them outrageous interest rates and points and fees.

And it has come home to roost. It has settled back on these bankers. And they're very, very profitable loans when they work. And they're very stinky loans on the bottom line when they don't work. And them not working now is affecting profit margins, and so stockholders are getting upset, because people, you know, in Countrywide, for instance, a lot of their — a lot of their profit came from subprime, not from conforming mortgages.


CAVUTO: I'm sorry, Dave.

RAMSEY: That's OK.

CAVUTO: But you seem to imply that the problem is not by the predatory lender, but, you know, I have to read what I am signing, right?


RAMSEY: Yes. Well, it is both. And you are always going to catch me coming down on the side of personal responsibility. I ranted a few minutes ago on my radio show on that, no question about it. So, no, I didn't mean to imply that it is all on the lender. But I don't want these lenders and I don't want these stock market geeks running around the country telling the average consumer that money has completely dried up. It has not dried up for worthy borrowers. And they are the ones that were the only ones that should have been in line in the first place. If you are not in a position to do that, then don't sign up for this junk.

For instance, if you sit down to sign up for a mortgage and it has got a prepayment penalty in it, that tells you right there you're a subprime borrower. They're ripping you off. Walk away from the table to do a deal another day.

CAVUTO: So, what about these people, Dave, who — who had loans, they were ready for closing, the original lender pulled out because all of sudden they have gotten very tight? There was nothing wrong with the borrower. He or she might have been putting up the appropriate percent, up to 20 percent. But they just got skittish.

Is that making this problem bigger?

RAMSEY: That is not happening. That is not happening.

CAVUTO: Well, Dave, I love you dearly, but it is happening, buddy.


RAMSEY: I have taken — I have taken e-mails from every corner of the nation all day long today.


CAVUTO: Dave, I'm not justifying it. I don't think it's fair or right, but we have had people on this show saying it has happened.

So, unless they are lying to us...


RAMSEY: I think they're talking...

CAVUTO: You don't think that is right, right?

RAMSEY: They are confusing the subprime market with the conventional market.

The subprime market is a destructive mess, no doubt about it, the securitization of that disaster, and the hedge fund managers screaming about it.

CAVUTO: Right.

RAMSEY: It's a mess, no doubt it.

But the conforming loans, the Fannie Maes, the FHAs, the V.A.s, with good quality mortgage companies that are doing business with integrity, they are closing those loans every day, all day long, right now.

CAVUTO: OK. You were getting a little bit nasty today...



CAVUTO: All right?

Seriously, Dave, very good seeing you again — Dave Ramsey, "The Dave Ramsey Show..."

RAMSEY: You, too, brother.

CAVUTO: ... out in Nashville, Tennessee.

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