Subprime blues.

The subprime meltdown is at its hottest in southeast Michigan. Pigass stupid borrowing/criminally fraudulent lending was robust here even before the auto industry began its downsizing over the last 18 months. Tens of thousands have taken the money and many of them are trying to run, but find themselves tethered to their house in an area where for-sale signs sprout like dandelions on every block.

This isn’t news. I’m just trying to give you some background.

(Obligatory it’s-all-about-me note: As of last week I thought that if circumstances forced us to sell tomorrow, we’d take a $30K bath on what we paid two and a half years ago. Then I walked the dog past a lovely comparable house a block away that’s been on the market a while. “New pricing!” the sign said. I glanced at the sales flyer in the box, and revised our potential loss upward to $50K. It’s only a loss when you sell, I know. Still. Unnerving.)

Me ol’ pal Ron had a story in Saturday’s paper that should have surprised no one, but set in stone a grim truth: We’re number one! No. 1 in subprime lending in 2006, and No. 1 in foreclosures:

About 55 percent of mortgage loans made in 2006 in Metro Detroit were subprime loans, carrying interest rates at least three percentage points higher than that of prime loans—double the national average. Laredo, Texas, had the second-worst rate, at 52 percent. The news is even worse in Wayne County, where nearly two of three home loans were risky, high-cost loans.

One local-jargon note: “Metro Detroit” is the local-media term for “everybody in the area,” and includes the affluent suburbs. “Wayne County” is mostly occupied by Detroit, with a handful of better-off communities — Dearborn and the Pointes, to name but two. Two-thirds in Wayne County isn’t surprising; 55 percent in the metro area is.

So what you have is the regular subprime meltdown that the whole country is experiencing, along with the market losses you’d expect in an area losing thousands of jobs. If you live in the Sunbelt, go ahead and kiss that giant electric bill you got last month. It’s probably a lot less than $50K.

But as you go further into the story, interesting details emerge. There’s a quote from a mortgage executive:

The foreclosures caused by questionable loan practices are likely to continue for another year, as adjustable rate mortgages spike, Glanz said. “Were there abuses? Yes. Could they have gotten financing someplace else (at better rates)? Maybe. (But) people did sign up for those loans.”

In other words: Tough luck, but you asked for it. But note the next passage:

One such family is Jerome and Alice Wilder, who live in a tidy home on Waltham Street in Detroit. The couple and their 4-year-old son, Jahari, had a fixed-rate mortgage on the home they’ve lived in since 1999. A mortgage officer repeatedly called their home in 2004, saying he could lower their house payments and get them thousands of dollars in cash if they refinanced.

“He kept calling and calling,” Jerome Wilder said. “He said, ‘I know you can use the money—Christmas is coming up.’ “According to the truth-in-lending statement prepared by the mortgage officer, the Wilders’ home payment would be $504 a month at initiation, and would rise no higher than $569. Despite the broker’s reassurances, the family’s house payments reached $900 a month by 2006.”It’s the most elaborate con game you’ve ever seen,” Jerome Wilder said. “I feel like I was taken for a ride.”

The Wilders’ home was sold at a sheriff’s auction in March, and the family is scheduled to be evicted later this month.

Obviously, the Wilders were defrauded. It’s a truth-in-lending statement, after all, not lies-in-lending. Where is the eager prosecutor bird-dogging the scoundrels who led them into this? Second-to-last graf:

ACORN officials have asked the Michigan Attorney General’s Office to investigate mortgage fraud in Metro Detroit, and several bills have been introduced in the Legislature to clamp down on predatory lending.

Note: ACORN, or the Association of Community Organizations for Reform Now. I first became acquainted with this group as a young reporter, when they came to Columbus to agitate for the homeless (I think). You could call them the quintessential so-called outside agitators, sending reps from the national organization to town to set up a local chapter with local leaders, and then call the whole thing “grass-roots.” At the time they were easy for the power structure to ignore, and I don’t know if that’s changed at all. I’d feel a lot better if that sentence said, “The mayors and city councils of 23 separate communities have asked the Michigan Attorney General…” But I’ll take action wherever it comes from, even ACORN.

I know what some of you are thinking: The Wilders had it coming, somehow. They didn’t read their closing papers, or something. Well, I didn’t read my closing papers either; if I had, my real-estate closing would have taken three days instead of 45 minutes. I looked over what I could beforehand, and took the word of the people who handed us the papers and explained what each one was. I was vastly reassured that I was dealing with reputable people, and that I was agreeing to a boring old 30-year, fixed-rate loan, given to people with excellent credit scores, and not something we bought after a phone pitch. I had faith in good faith. Maybe I should dig them up and reread them.

I remember ads that ran on TV during the subprime boom. One featured a jolly black couple whose nice lender helped them get out from under all those credit-card bills, lowered their payments, and freed up enough cash to buy an above-ground pool. I wonder what apartment they’re living in now.

OK, Monday bummer over. On to the bloggage:

Here’s one for Ashley, who played to be heard when he was in a marching band:

The joke about black-college football games in the South is that the crowd patterns are the reverse of the norm. The fans talk, flirt and eat during the first two quarters, then return to their seats to scrutinize the marching bands through their eight-minute shows at halftime. …

In 1989 the Prairie View drumline introduced a new drums-only feature sequence, which usually includes a kind of circus gymnastics: throwing drums around, drummers carrying one another upside-down by the calves, walking and playing in pairs like a push-me-pull-you. And in 1994 the Box began rotating sections of its drumline during the routine, so that snare drummers weren’t always up in the front.

Amid the rampant trash-talking between supporters of different black college bands, Prairie View’s pioneering of this modern drumline feature seems to have become accepted history.

“If any other band tells you that they started that,” said Skip Wilson, an alumnus of the Box who now helps direct it, “I’ll eat a bug. And I’ll let you choose the bug.”

You mean they’re not in your ass? Your politics are all in your head:

Exploring the neurobiology of politics, scientists have found that liberals tolerate ambiguity and conflict better than conservatives because of how their brains work.

In a simple experiment being reported today in the journal Nature Neuroscience, scientists at New York University and UCLA show that political orientation is related to differences in how the brain processes information.

Previous psychological studies have found that conservatives tend to be more structured and persistent in their judgments whereas liberals are more open to new experiences. The latest study found those traits are not confined to political situations but also influence everyday decisions.

All I see are…shades of gray!

Well, it’s Monday. It’s fittin’.

Posted at 12:13 am in Current events |
 

25 responses to “Subprime blues.”

  1. MichaelG said on September 10, 2007 at 7:59 am

    It’s possible to get in trouble with a standard loan as well. I have a fixed 30 year loan at a very good rate. When I bought my house in March the lender approved me for a loan 20% higher than I ended up taking out. They were more than happy to sign me up for an amount higher than I would have been comfortable with. I looked at the numbers and at what I felt I really wanted to pay per month and kept my sights in that area. Eventually I was lucky enough to bag a house from a desperate seller for much less than it was worth. But if I hadn’t gotten an attack of the cautions, I could easily be paying $5-600 more per month than I am now. This on an excellent standard loan.

  2. Mindy said on September 10, 2007 at 10:20 am

    My mother couldn’t stand the idea of waiting to sell her house before buying the one she wanted, so she bought it anyway despite lectures from everyone she knew and moved in late last year. The house she vacated is still sitting while we watch it lose value by the month. She suffered both a heart attack and a mild stroke this year and refuses to quit smoking. I’m hoping against hope that the vacant place, now rented, sells before she smokes her last cigarette so I’m not left with a nightmare.

  3. John said on September 10, 2007 at 10:26 am

    Locally stories here (southeast Connecticut) in the paper (The Day) has described out right fraud on the part of the realty company and the borrower (claiming undue pressure). The realty company profits from buying and re-selling properties at jacked up prices. They get the borrowers (the stories in the paper were of people “less sophisticated” about banking than the average turnip) to write bogus checks of $50k to show they have assets. These checks were never cashed, just photo-copied. Also, outrageous claims of monthly income are included on the lending form. I’m no lawyer, but that seems like fraud to me. I would like to see some prosecutor start squeezing a few sleazy folks.

  4. nancy said on September 10, 2007 at 10:29 am

    Michael, that sort of upselling is just s.o.p. these days. It sort of makes me yearn for the old days, with cranky bankers who acted like every penny they loaned you was coming out of their own pockets. Some of the related fallout here in the D is just horrifying — people suing developers for putting the brakes on slow-selling subdivisions, leaving the one or two folks who bought living in abandoned moonscapes of cleared lots and mud pits, to name but one. And yet, new houses are still being built. Why? “People want new houses! They want the kitchen they want, not what someone else chose.”

    At times like this I wonder where common sense ran off to.

  5. Sue said on September 10, 2007 at 10:30 am

    If you check back on the big fuss over credit card rates and abuses which culminated in “hearings” last spring, you will see why there is no great concern about fixing the mortgage problem. The banking industry has its hooks into congress so tightly that they (congress) can’t/won’t make a move. When I did my citizen’s duty last spring and contacted my elected officials about the c.c. situation, I didn’t even receive a reply from one of them and the others gave me variations of “you can always take your business elsewhere”. Representational government is alive and well: our elected officials represent those who pay the best.

  6. Kim said on September 10, 2007 at 10:40 am

    I read the entire local paper every day (thank god it’s getting smaller by the minute) and have been struck by the number of foreclosures appearing in the legals. It used to be folks on the hook for $100K that originated 10 years ago. Now it’s folks who owe typically between 175K and 250K who signed a year ago. I also see quite a few foreclosures on notes that seem to be new HELOCs — stuff in the 25-90 range, written in the past year. It bums me out, and then I smile when I see a note for over $1 million for a house that sold a couple years ago for $500K, had a renovation, and has been on the market for more than a year.

    This new house thing is, I think, part of our culture that massages the “I deserve it now” mentality. Advertisers are big on pushing that message, and many Americans fall hard for it. I’m pretty liberal, but seems like it’s making us soft and unable to get our heads out of our hind ends to see the world around us.

  7. Danny said on September 10, 2007 at 10:43 am

    This kinda crap would have never happened in Pottersville. Beford Falls is a different story.

  8. Danny said on September 10, 2007 at 10:51 am

    Hey, just got this joke in email and it goes with that posting about the conservative-liberal mind. Enjoy.
    ===============================================
    Are you a Democrat, Republican or Redneck?

    Here is a little test that will help you decide…
    The answer can be found by posing the following question:

    You’re walking down a deserted street with your wife and two small children.

    Suddenly, an Islamic Terrorist with a huge knife comes around the corner,
    locks eyes with you, screams obscenities, praises Allah, raises the knife, and charges at you.

    You are carrying a 40 caliber Glock, and you are an expert shot.

    You have mere seconds before he reaches you and your family. What do you do?

    Democrat’s Answer:

    Well, that’s not enough information to answer the question!
    Does the man look poor or oppressed?
    Have I ever done anything to him that would inspire him to attack?

    Could we run away? What does my wife think? What about the kids?
    Could I possibly swing the gun like a club and knock the knife out of his hand?

    What does the law say about this situation?

    Does the Glock have appropriate safety built into it?
    Why am I carrying a loaded gun anyway, and what kind of message does this send to society and to my children?
    Is it possible he’d be happy with just killing me?

    Does he definitely want to kill me, or would he be content just to wound me?

    If I were to grab his knees and hold on, could my family get away while he was stabbing me?
    Should I call 911?
    Why is this street so deserted?
    We need to raise taxes, have a paint and weed day and make this a happier, healthier street that would discourage such behavior.
    This is all so confusing! I need to debate this with some friends for few days and try to come to a consensus.

    Republican’s Answer:

    BANG!

    Redneck’s Answer:

    BANG! BANG! BANG! BANG!
    BANG! BANG! BANG! BANG!
    Click… (Sounds of reloading)
    BANG! BANG! BANG! BANG!
    BANG! BANG! BANG! BANG!
    Click

    Daughter: “Nice grouping, Daddy! Were those the Winchester Silver Tips or Hollow Points?”
    Son: “Can I shoot the next one?”

  9. Jolene said on September 10, 2007 at 11:09 am

    The new bankruptcy law has made things much more difficult for people who’ve gotten into unmanageable debt. Until recently, a high proportion of bankruptcies were due to illness, divorce, and job loss. And re yesterday’s topic, many who filed due to illness had been insured, but lost their insurance when they lost jobs, sometimes because of illness.

    The housing problems will make things worse for some of these folks.

  10. Jolene said on September 10, 2007 at 11:17 am

    Petraeus hearing about to begin now in Eastern time zone.

  11. brian stouder said on September 10, 2007 at 11:22 am

    You know, I have never lusted for a new house, and never ever ever for a custom-built one. I always figured that the disconnect between your ideal, and the actual final house would HAVE to be disappointing.

    We bought our house about 15 years ago, and it was about 25 years old then – and a neighbor 3 doors down with a very similar house is selling theirs for pretty much twice what we paid….so once again, good ol’ Fort Wayne ain’t so bad!

    btw, I got published!! (in the Logansport Pharos-Tribune) Today, Cass County; tomorrow….errrr…Fulton County!!

  12. Dorothy said on September 10, 2007 at 11:30 am

    The house we have not sold yet in South Carolina was brand new 3 years ago when we moved in. We weren’t really looking for a brand new one, but the realtor who was assigned to us (GE Relocation) would only show us new houses. She said we could look for non-new ones on our own if we wanted to, but the message was clear: get a new one or get another realtor! Well, we bought this new one, and it did occur to me then “What if we try to sell this one in a few years, and buyers might only want to look at new houses??”

    Right now neither kind is doing very well, but I’d venture that the new ones are faring slightly better. Mine’s been for sale since May 17th and we’ve had 3 open houses – and only one couple showed up (for the 2nd open house). It’s extremely discouraging. The icing on the cake: four houses away from us this couple listed theirs 2 weeks ago for $306,000. They paid $189,000 for it four years ago. They did some upgrades, but we were convinced it was vastly overpriced. They accepted an offer 8 days after it listed. DAMN!!!!

  13. Julie Robinson said on September 10, 2007 at 11:47 am

    I’m with Brian, although occasionally I think about something new that doesn’t need constant maintenance. We don’t live in our “dream” house by any means, but we also get to sleep all night without having nightmares about paying the mortgage. Like Nancy, I tried to read all the documents at closing the first few times we went through it. They are written in legalese, though, and I’ve found that often the closing agents don’t even know what they mean. Could this also be part of the problem?

  14. ashley said on September 10, 2007 at 12:51 pm

    One irk of New Orleans: very few new houses. Ours is one of the newest on our block, and it’s 92 years old. And cypress siding handles floods pretty well.

    I liked that Prairie View article. Grambling, PVU, Southern, and FAMU are the class of the HBCU bands IMHO. A friend of mine was the only honky in the FAMU Marching 100 in 1980 or so. He got some kind of minority scholarship to go there and study architecture.

    For the bands to have any kind of money, either they have to have a lot of Alumni contributions, or they have to be away from the music department. At many large schools, the marching band is not part of the music department, but rather the athletic department.

  15. brian stouder said on September 10, 2007 at 3:20 pm

    Another comment from the cheap seats –

    for every person who is shackled to a job they don’t really like because of their health insurance – I bet I can come up with two more who are shackled to THEIR jobs because of their mortgage payments!

    In my experience, that is the way the world works; you don’t feel like getting up in the morning, but you DO – because you simply must (if you want to stay ahead of your house/car payments, and/or keep your insurance)

    I remember the genuine fear I felt when we ‘signed the dotted line’ for more debt than I’d ever shouldered in my life (by a factor of 10!)…I think that moment – as much as any – marks a genuine transition from kiddo to adult

  16. LA mary said on September 10, 2007 at 3:31 pm

    Hmm, I don’t know Brian. I know I could work independently and make more money, but not enough to pay for bennies for myself and the kids. My mortgage remains the same but bennies don’t.

  17. brian stouder said on September 10, 2007 at 3:45 pm

    My mortgage remains the same but bennies don’t.

    An excellent point; I agree. Our insurance is the aforementioned Nirvana to no-way-in-hell PHP; we have since transitioned into an HSA, which I really like, but which is a far, far cry from what we had.

    (my original comment refers to the genuine stress/oppression of assuming a debt that looks bone crushing, and in so doing becoming married to a work-a-day existence wherein your employer always has the whip hand; a genuine turning point in life, at least for me)

  18. Peter said on September 10, 2007 at 3:56 pm

    Brian, I know what you say. When my lovely bride and I bought our first house, I was a nervous wreck. And we didn’t have children!

    Now, I’m on my own (job wise, not spouse wise), woefully underinsured, a mortgage that’s twice as much as the old one, a kid in school, and I’m just a happy go lucky guy. Maybe I’m finally used to debt. Or maybe it’s the meds.

  19. Jen said on September 10, 2007 at 4:12 pm

    Just finished Stumbling on Happiness by Gilbert, and it kinda validated our family’s whole pattern, which is living unfashionably below our means. But, more than that, Gilbert talks about thought-habits and cultural beliefs as if they were organisms unto themselves, with the need to be self-sustaining.

    One of the most pervasive of these is the idea that money = happiness, traced back to the idea that if people don’t believe money = happiness, then entire economies will collapse. So it was a seed semi-consciously planted, and subconsciously and ruthlessly propagated.

  20. Julie Robinson said on September 10, 2007 at 4:31 pm

    Stumbling on Happiness will go on my list to be read. In our house, we decided we like having a life more than big careers.

    We also decided that as much as possible, a kid should have a parent around. So I didn’t work a lot, and only part-time when absolutely necessary. And you know what? It was good. No, I didn’t build a pension or much social security, so I’m sure there will be those who call me naive. But I got to be a big part of my kids’ lives when they were young. Wouldn’t trade it for anything.

    Now I don’t want anyone to take offense and tell me that they have to work to support your family. You probably do. This was the choice our family made, and I’m not pushing it at anyone else. My husband didn’t earn the big bucks, we just learned to live joyfully and frugally.

  21. Jeff said on September 10, 2007 at 9:16 pm

    Ditto Julie, ‘ceptin’ i’m the part-time freelancer in our family; since only my dearly beloved could have the kid, it seemed fair for me to take my turn meeting him off the bus (plus she’s more marketable than me).

    What horrifies me are my parents’ attitude, who are delighted that my sister & husband went waaaaay over their heads to get an HGTV-style house, and a little surprised at the fact that we’ve not prioritized getting “our own house” with the granite countertops, soak tub, etc., buying perfectly adequate homes that are in our price range, and allow us to save and give to our church and charity. The older generation, i keep hearing and see in my own family, are playing their own odd part in this race to the bottom.

  22. Jonas said on September 10, 2007 at 10:28 pm

    It’s somewhat funny that you place Google ads on your site, which given the content of your post will clearly come up with subprime advertisements.

  23. nancy said on September 10, 2007 at 10:33 pm

    Yeah, I noticed that. I comfort myself with the knowledge y’all aren’t dumb enough to fall for them. Am I right?

  24. alex said on September 11, 2007 at 10:46 am

    Commendable restraint there, liberals!

  25. 4dbirds said on September 11, 2007 at 1:00 pm

    I think I said it here, maybe not but I kiss my 5.6 percent 30 year, VA mortgage every night before I go to sleep.