People in large crowds are plain dumb!

It is true and very few would have a challenge to disagree … It’s all down to something I call the “power of suggestion!”. How many times have you said something that sounds intelligent, that those around you then cling onto and before long have formed an entire conversation around?

It’s this very viral affect that leads to a mass in uninformed opinion. This opinion then of course leads to decisions – some important – that of course are misinformed, reckless or dare I say – plain stupid.

I take this very position from granted what was small crowd that were discussing mortgage finance (aren’t we all?) in my local barbers today. The conversation was along the lines of the need to secure a mortgage on a property that had come to be for sale “in the family” and so it was “all out” on securing the finance. The strategy: apply for a mortgage from 1 lender; and borrow the deposit from another! It was plain none of them had a clue, and had been living in a cave – collectively – for the last 18 months.

Now, from what I know of banks right now – this would have been possible – but I like to think there have been some changes in banks (especially since as a UK tax payer, I own a part in them all!) that would go a little to protect against reckless lending i.e. lending the deposit as well as the capital; or indeed seeing that this has been the case by way of a credit search etc. However, this “crowd ” were, at the suggestion of one in the crowd, of the opinion that he / she could actually secure this level of finance – ie 100% LTV. They were clearly misinformed but thinking it through, I actually think that if they were to put this plan into action, lie that they either had the deposit, or saved it up etc that they could secure the necessary finance.

So as much as only 1 of them had this idea – and they others agreed – I am sure they all left thinking “that’s not a bad idea” and may have then started to plan accordingly.

The question: As much as people in groups are dumb – what protection do the rest of us have against this when the dude in the bank selling the loan / mortgage / both is 21, spiky haired and as much keen on the commission of said sale as the buyer is on securing a toxic mortgage?

I would like to think there was some technology in there to do just that …ahem!