I was home last night flipping through the news stations and landed upon CNBC’s David Faber hosting “House of Cards”.  A two-hour special which documented the history of the mortgage industry implosion and how we got to where we are today. I admit, I turned it off early to catch the end of CSI:Miami and I started to get bored towards the end.  

 

David Faber interviewed scummy mortgage bankers, sleazy Wall Streeters and many homeowners who got shafted in the quest for the American Dream. There were clips of Greenspan and Bush- two of the big government players in the boom and bust. The scummy mortgage banker was some long haired dude in California with a big busted girlfriend and a greasy Zen looking hair doo. The Wall Street guy, Michael Francis, showed great remorse, as he discussed the games he played back then.

 

The part that got me was the homeowners (or defaulters) they interviews. Most were minorities, claiming they just wanted a piece of the American dream. Sad stories to be told:

 

1.    The mortgage broker got them two loans one for the purchase money and one for the down payment so they did not have to come up with any money at the closing

 

2.    The mortgage broker got them an interest only loan so the payments were quite small compared to the actual amount due

 

3.    The lender refinanced the mortgage and the broker got me 100% of the equity of my house. Now the home value is down 30% and I owe a lot more than it is worth.

 

4.    Oh, and the one where the immigrant came to this country and wanted the American Dream of owning a home and then pulling the equity out of it to start his own business-also the American dream. He knew he could do this because the realtor told him the house was going to double in value in a few years!

 

As David (a smart man) listened to the homeowners’ stories with great sympathy and sometime a shocked look upon his face…..did he look around?  Let’s review each scenario:

 

1.    Do you think it is a smart thing to put nothing down on a home, or were you ecstatic that you could use your meager savings to buy furniture? Did your brother in law tell you that he did the same loan and his house already went up in value since he bought it? Did you really think your home was going to double in value in a few years and you would refinance?  What happens if you became completely disabled and could not work? Did you get long term disability insurance in case this happened or could you not afford the premiums?

 

2.    Sadly, you explained that you did not really understand the actual payments due on an interest only loan? If you did not understand, did you ask someone to explain it to you? Did you not brag to your friends at the neighborhood BBQ that your monthly payment on your home was under $1,000! Did you not see how big that house was!

 

3.    The people that refinanced their home and took out 100% of the equity happily listed all the needless improvements they made to their little shack. Did you really need to gut that kitchen? You were quite happy with the money then and made sure you spent every dime. Incidentally, you said you made some improvements to the backyard, however I did not see one bush out there!

 

4.    Lastly, to my American Dreamer: not everybody should own a house and not everybody is capable of being self-employed. As you sadly stood in front of the camera, crying that you did not understand what you were getting into, my eyes wandered to the leather couches, nice television and pretty kitchen gadgets in your home. Did the mortgage broker pay for that couch? BTW, what kind of car do you drive?

 

Is the consumer not to blame for their own stupidity and greed or should we blame Iceland for that!

Dale Siegel