In my last blog in this series, I want to look behind the technical and fundamental picture to remind myself that behind the numbers, there are human stories and tragedies.
Adam Michaelson in “The Foreclosure of America” reveals the faces of both sides of the fence. Michaelson was senior vice president of marketing for Countrywide Financial. Countrywide was the biggest mortgage lender in the USA and one of the largest vendors of sub-prime mortgages. Michaelson’s intimate picture of the company shows that while it certainly made serious errors of judgement, it was driven by both a desire for profits and to provide a home for those that had hitherto been unable to obtain one.
Debbie was such a person. Michaelson interviewed her for his book and said that it was one of the most heartbreaking stories. Debbie and her husband Mark lived in one of the crime infested streets of Queens. With a sub-prime loan, Debbie and Mark were able to buy a home for themselves and three sons in Long Island on no money down and US$2100.00 pm. The loan was 80/20 loan: 20% of the loan was a fixed-rate and the other 80% an Adjustable Rate Mortgage.
Their take home-pay was US$6000.00 per month. Debbie said she was not concerned about the rest of the loan’s interest after 24 months because the broker told them they could always refinance. In 2006, the loan reset to US$2500.00 pm and they were able to refinance on a house that had risen 17% in value. However, the new loan was a completely Adjustable Rate Mortgage and rose to almost US$4000.00 per month over a number of years.
When Mark hurt his back, Debbie saw the beginning of the end of her dreams. They went bankrupt afer leaving the only home they had ever owned. Their current house has a backyard filled with a mess of dangerous concrete blocks.
If I am right about the next dangers of second-wave tsunami, variations of this story will be repeated time and again. And here is the point: sure, the parties to this tragedy must take responsibility - Countrywide, Debbie and Mark. But the biggest culprit in this whole tragedy wrings its hands and cries: “It was not our fault” - witness Paulson’s interview and his reasons for the causes of the current crisis.
The US government and other governments of the world are still at it - inflating the money supply, and spending money they don’t have - the effects of these efforts will make themselves visible later this year.
Refer this blog post to a friend or colleague…
