The New York Times has an excellent story on how banks are luring struggling Americans into ever-more debt by assembling their private information to create detailed and amazingly timed pitches.

Singling out even struggling American consumers like Ms. Jerez is one of the overlooked causes of the debt boom and the resulting crisis, which threatens to choke the global economy.

Using techniques that grew more sophisticated over the last decade, businesses comb through an array of sources, including bank and court records, to create detailed profiles of the financial lives of more than 100 million Americans…

These tailor-made offers land in mailboxes, or are sold over the phone by telemarketers, just ahead of the next big financial step in consumers’ lives, creating the appearance of almost irresistible serendipity.


Of course, these tactics were used heavily in the mortgage-lending frenzy:

During the housing boom, “The mortgage industry was coming up with very creative lending products and then they were leaning heavily on us to find prospects to make the offers to,” said Steve Ely, president of North America Personal Solutions at Equifax.

One product created by credit-bureaus like Equifax sold information on people about to buy homes to brokers and banks. Here we get into some of the boiler room tactics that Audit kingpin Dean Starkman wrote about here:

In the midst of the high-flying housing market, mortgage triggers became more than a nuisance or potential invasion of privacy. They allowed aggressive brokers to aim at needy, overwhelmed consumers with offers that often turned out to be too good to be true. When Mercurion Suladdin, a county librarian in Sandy, Utah, filled out an application with Ameriquest to refinance her home, she quickly got a call from a salesman at Beneficial, a division of HSBC bank where she had taken out a previous loan.

The salesman said he desperately wanted to keep her business. To get the deal, he drove to her house from nearby Salt Lake City and offered her a free Ford Taurus at signing.

What she thought was a fixed-interest rate mortgage soon adjusted upward, and Ms. Suladdin fell behind on her payments and came close to foreclosure before Utah’s attorney general and the activist group Acorn interceded on behalf of her and other homeowners in the state.

“I was being bombarded by so many offers that, after a while, it just got more and more confusing,” she says of her ill-fated decision not to carefully read the fine print on her loan documents.

More reporting like this, please, and put it on page one.

The Journal is good today with a long look at one of the worst-hit cities in the housing bust: Los Banos, California. How bad is it there? Home prices have already fallen 66 percent. One in five houses is in foreclosure. Eighty-five percent in the county have negative equity now. Amazing.

The paper sees signs of a bottom there, though, with sales in California up 65 percent from a year ago. And really, how much further could it possibly fall? That’s a crucial question because as the WSJ says:

Until markets like this are sorted out, there’s little hope for calm in the global financial system. As banks and governments survey the wreckage of residential real-estate investments, the central mystery is how to value the trillions of dollars in securities that are tied to U.S. mortgages. These securities are so hard to value in part because no one knows when normalcy will return to places like Los Banos.

A chart says California alone accounts for a third of all securitized mortgages in the country. Here’s what happened in Los Banos:

Subprime lenders poured in, making cheap loans with few questions asked. Builders offered to pick up the tab for their customers’ closing costs.

Home prices soared. In 2005, one local builder was selling three-bedroom homes for $300,000 — more than three times what it asked for a similar design in 2000.

Many lenders catered to buyers with shoddy credit, who qualified for “affordability” loans with low payments that typically ramped up over time. In 2006, 45% of the home mortgages and refinance loans in Los Banos were high-rate loans, most of which would be considered subprime, compared with a national average of 29%, according to a Wall Street Journal analysis of federal mortgage data. The town’s top lenders included Countrywide Financial, New Century Financial and divisions of Golden West Financial and Washington Mutual — all former highfliers in the mortgage business whose holdings later turned toxic.

The Journal also has an interesting story on how it’s getting harder for illegal immigrants to buy homes—something that happened in the last five years as part of the general loosening of standards for lending.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.