Memories of mortgage mania
"No verifiable employment. No source of funds. No credit. No green card. " No problem, says the promotional flier.
Seattle Times staff columnist
"No verifiable employment. No source of funds. No credit. No green card."
No problem, says the promotional flier.
What is this, I wonder. An ad for a day-laborer program?
Nope. It's an ad for a home loan. From back in 2005 — a period when America lost its mind, one mortgage at a time.
"Simplify your life," reads another brochure from that era. "Employment info... NOT REQUIRED. Income info ... NOT REQUIRED. Asset info ... NOT REQUIRED. Get up to $1,500,000!"
Pierre Stephenson is a real-estate agent in Ocean Park, in Southwest Washington. He has a file 4 inches thick of these pitches from home-mortgage lenders, all dated between 2003 and 2006.
It's a scrapbook of mass delirium. It doesn't tell the technical story of the country's financial carnage — for that you have to understand things like credit derivatives, which I do not. But the psychology of how we got into this mess is on naked display.
Easy credit means easy living, blare the brochures.
Get a loan for 125 percent of the value of your home, says one. "Major job gaps can be okay!"
We give loans down to a 400 credit score, boasts another. That's the bottom 5 percent of the least-trustworthy borrowers in the U.S.
Depicted in the fliers are the deals at the core of the financial crisis. But also a society unmoored.
Take the so-called liar loans, where you didn't have to prove your income and could fabricate whatever you wanted. Apparently up to 90 percent of customers lied on these loans. As long as housing kept going up, who cared? It was standard operating procedure.
At random I called the phone numbers listed on eight of the fliers. Firms like Decision One Mortgage. Millennium Funding. Oakmont Mortgage. Long Beach (owned by Washington Mutual).
All eight are out of business.
One guy picked up. He is Jim Petersen, who was a Seattle account executive for the mortgage arm of World Savings, a savings and loan that was bought in 2006 by Wachovia. In August Wachovia shuttered Petersen's lending unit.
"I'm home cleaning out my basement," he said.
We talked for an hour. World Savings was no fly-by-night outfit. It was around for 40 years and had $125 billion in assets, much of it from old-time savings accounts.
He said most of the loans were — still are — sound. But he also described a group slither to the bottom. Where "something went horribly wrong, even as most people didn't do anything horribly wrong."
It was driven by profits. Every day in mortgage mania, his staid firm would lose business to lenders offering sweeter, riskier deals.
"You lose enough of your market share and eventually you lower your standards, too," he said.
Propping it all up was a genuine belief, foolish in retrospect, that housing wasn't like the dot-coms, he said. It wasn't going to fall.
"I guess it's the psychology of the bubble," he said. "You don't know you're in one until it pops."
I'm not recalling this to cast blame. All the talk is of a financial meltdown, but we also had a cultural meltdown. A something-for-nothing binge stretching from Main Street to Wall and back.
It was a mass lowering of standards. Reckoning with that will make fixing the economy seem like a cinch.
Danny Westneat's column appears Wednesday and Sunday. Reach him at 206-464-2086 or firstname.lastname@example.org.
Copyright © 2008 The Seattle Times Company
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