WSJ’s Good Vehicle for Explaining Subprime Mess

Just wanted to make sure you saw this great A1 story in the Journal on Saturday.

Reporter Michael M. Phillips tells the tale of the subprime mortgages crisis through a single ramshackle homestead in Arizona. It’s just about note-perfect.

There are a lot of things to like about the story, including the superbly written lede:

The little blue house rests on a few pieces of wood and concrete block. The exterior walls, ravaged by dry rot, bend to the touch. At some point, someone jabbed a kitchen knife into the siding. The condemnation notice stapled to the wall says: “Unfit for human occupancy.”

The story of the two-bedroom, one-bath shack on West Hopi Street, is the story of this year’s financial panic, told in 576 square feet. It helps explain how a series of bad decisions can add up to the worst financial crisis since the Great Depression.

And the headline, which is one of those old-style WSJ tripartite ones I and so many readers loved but have dwindled down to just the “ahed” nowadays, is great, too:

Would You Pay $103,000 for This Arizona Fixer-Upper? That Was Ms. Halterman’s Mortgage on It; ‘Unfit for Human Occupancy,’ City Says

The refinanced mortgage was given to the owner (who is on welfare) in a series of loans that upped the debt burden on the shack.

There’s so much good color in this story. Here about the owner:

At the center of the saga is the 61-year-old Ms. Halterman, who has chaotic blond-gray hair, a smoky voice and an open manner both gruff and sweet. She grew up here, working at times as a farm hand, secretary, long-haul truck driver and nurse’s aide.

In time, the container of vodka-and-grapefruit she long carried in her purse got the better of her. “Hard liquor was my downfall,” she says.

And this:

Ms. Halterman also collects people. At one time, she says, 23 people were living in the tiny house or various ramshackle outbuildings.

Her circle includes grandchildren, an old friend who lost her own home to foreclosure, a Chihuahua, and the one-year-old child of a woman Ms. Halterman’s former foster-daughter met in jail.

In the mail recently, she noticed a newsletter sent by a state agency with an article titled “Raising Children of Incarcerated Parents, Part I.”

“I need to read that one,” she said aloud to herself.

The Journal shows how the process worked. Enormous appetite by Wall Street for shaky loans, fueled by brokers and lenders who didn’t even look at the houses they were lending on but collected huge fees (in this case about 10 percent of the total). Of course, Ms. Halterman’s loan ended up being bundled into a security along with thousands of other subprime mortgages. S&P and Moody’s rated the security AAA. The Oklahoma teachers retirement plan invested in the bond (as did PIMCO—whoops, Bill Gross!) and will take or has taken huge losses on it.

And, obviously, the house was a foreclosure.

All around, a great effort by the Journal here.

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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 Follow him on Twitter at @ryanchittum.