When Audit honcho Dean Starkman asked me if I would write a story about losing my family’s home when I was fifteen, I readily agreed, not realizing at the time how difficult it would be. Sorry, dear reader, I was stuffed with barbecue and beer, on a train heading downtown from Harlem when I said “Sure, why not?”
But trying to write it was a lesson in and of itself. I was surprised how painful it was to dig back into that stuff, which began nearly two decades ago and ended when we moved out in 1993. I told my wife after I’d turned it in that writing it was worth $10,000 of therapy.
Writing is always a somewhat painful experience, but throw in the remembering and reassembling of personal history I’d done my best to cover up at the time (I was already uncool enough in high school without being the poor kid, too!), not to mention having my mom relive the ordeal so I could get my facts straight, and the process felt a bit like performing dental surgery on myself with a pair of pliers.
Okay, so that’s hyperbole, but the difficulty I had writing the story was a reminder of why we thought it was one worth sharing. The reaction to it—both positive and negative—has proved conclusively in my mind it was.
I heard from lots of journalists, some of whom I know and many of whom I’ve never spoken to, from across the country and the world. But I wanted to respond to the folks who took the time to comment on the piece online.
Certainly, it’s a sensitive issue however you think about it, as you can see by reading through the comments (a special shout out to “Mary” for calling me an “elitist, just like your Republican parents.” The fam got a big kick out of that one in our hotel room at Disney World). Lots of people view the epidemic of foreclosures happening now as a necessary corrective to poor choices made by homebuyers. I have a lot of sympathy with that view, believe it or not. We know speculation was rampant (though probably no more than 20 percent of purchases at the peak) during the bubble—that’s what bubbles are.
And, as Carl Stevens wrote, there’s certainly a case to be made that even non-flippers ought to take their lumps:
I have sympathy for (bad) luck, but less so for bad choices …. Especially when I am being asked to fork out money for it.
But I think Keith Robers puts it well in his comment:
To my way of thinking there are three kinds of people who took out loans they couldn’t afford. 1. Those that thought it was the only way they could get a home. I give them a free pass. 2. Those that were trying to keep up with the Jones. They get my scorn and derision. 3. Those that were trying to make a buck, the flippers. I hope only bad things happen to them.
Ultimately, despite my conflicted thoughts about personal responsibility, I’ve come to put most of the blame on the banks and mortgage brokers (pushed by a ravenous Wall Street securitization machine), rather than the regular folks who got in over their heads, even if those regular folks suspected they might be reaching too far.
It comes down to this: there’s a massive information disparity between the two sides at the mortgage table. The banks and brokers knew damn well that the people they were putting in these houses couldn’t pay them off if the market turned (and whether or not they thought the market would utterly collapse as it has, these financial types know a market always turns). But they didn’t care because they knew they could unload their dirty deeds on some sucker running a pension or hedge fund via the magic of the mortgage-backed securities and collateralized-debt obligation markets.
Ma and Pa Smith, sitting across the desk from Broker Bob, may have worried about whether they’d be able to pay the adjustable-rate mortgage when it reset in four years, but who doesn’t—even if they can afford it. All thirty-year commitments are to some extent a leap of faith, and you’re some kind of sucker if you believe the Smiths weren’t being cajoled and smooth-talked past their worries by the brokers.
This isn’t to mention the outright criminality on the part of the brokers (and yes, the crimes go all the way up the chain to the banks, Wall Street, and the credit-ratings firms—but that’s a somewhat separate story) that was rampant in the boom years. Fudging people’s incomes or conning them into refinancing or giving them ARMs they didn’t want. Want to know the extent of the shadiness? This Wall Street Journal investigation from late last year found that at the peak of the boom, 61 percent of those who got subprime mortgages likely qualified for much lower cost prime loans. Did those home buyers put themselves into higher-cost subprime notes or were they deceived into them? Guess.
But some don’t buy it and I guess they probably never will. Here’s “ed” commenting on my report of my own parents getting put into an ARM with a pre-payment penalty, despite me repeatedly telling them not to get one:
Come on now. They signed the house purchase documents and didn’t know they had an ARM rate? I find this very difficult to believe. Mind you, these were not novice home-buyers, and had been through the process once before. I have had enough of the unscrupulous mortgage brokers story. The truth is there were willing buyers who took advantage of the system. Sure, they say now they were bilked. But as anyone who goes through a settlement knows, everything is explained in excrutiating detail, and homebuyers sign papers showing they were told in detail what they were getting into, and what the consequences were.
Yes, that’s right. My folks were put into that type of loan unbeknownst to them, and even against their expressed wishes. Hard to believe, I know, but unfortunately it’s very true. I’m glad your broker seems to have been honest, though the broker who dealt with my did too until they went to sell their house, but it’s clear that many, many were not.
The point of “My Foreclosure” was simply to tell what it’s like to lose your home. It’s a real trauma and I feared the awfulness of it might get slightly lost in the blizzard of bad news and statistics. We thought business reporters, especially in the elite publications read by the national and global decision-makers, might be somewhat detached from this reality.
So to further get the point across, check out journalist Darleene’s poignant post about her own experience a decade ago, which she linked to in the “My Foreclosure” comments.
And I’ll conclude with an e-mail from a reader named Erin, who heard me on an NPR program last week. She and I are old enough to talk about this, but for many of the hundreds of thousands of kids going through this now, it will take years for them to come to terms with it:
I just happened to hear you on Here and Now in my car on XM. Your story is somewhat the same as my family’s. My father owned a gas station in the 70s, but by the early 80s he was the only person he could afford to employ so he worked long hours and finally he just couldn’t make it. My parents declared bankruptcy and we lost our home when I was 11. We moved out of town which is probably a good thing looking back. But my dad spent almost the next ten years trying to find steady work. It’s hard when you’re in your 40s, with an MBA and a former self-employed person to find someone to hire you. My father also had worked since he was old enough to have a paper route (and like your parents — staunch Republican). I remember how I was known for not eating lunch in middle school — my friends thought I wasn’t hungry, but I was actually too ashamed to go get the free tickets from the secretary because someone might hear. I didn’t eat lunch regularly until I went to college.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 email@example.com. Follow him on Twitter at @ryanchittum.
My parents still rent — 20 years later. I own a home with my husband, but we didn’t buy at the high end of what we could afford and we plan to make due with this home even if more children make it a tight squeeze. I also used to be in the mortgage industry and I also agree that there are plenty of people out there ready to make a buck off of people anyway they can. I also know that not many people are educated about mortgages and home financing, especially those whose parents didn’t own their homes.
Anyway, thanks for sharing your story. It’s always good to hear someone else whose background is similar to mine. It also throws people’s ideas about welfare and government programs out the window. If people think there are a lot of people who are looking for ways to get on welfare — they are wrong. Another thing — my older brother got a job and worked through high school to pay for his own car, pay for opportunities like playing sports. Our state government found out and my parents had to pay back some of the money they were given. Forget that they had 3 other children. So we were penalized for my brother paying for himself because they thought he should pay things for my parents. It was an awful feeling for all of us because we knew how hard my brother worked and how proud my dad was.