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.
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.