I’ve seen more sides of this ‘mortgage meltdown’ than most – real estate agent, mortgage broker, property owner, investor, forclosee, community preservation panelist, credit union asset liquidation manager. Therefore, I feel like I’ve got a little bit to say about our current mess, so I’d like to provide a little enlightenment from a few perspectives. I must first warn anyone stupid enough to read this that all commentary following is purely subjective, thoroughly opinionated, and devoid of any factual data or links to back up my beliefs. Feel free to do your own research and post it up to support me or rip me to shreds.
First, how did we get here? Around the turn of the century, real estate values began spiking, as you’ll remember fondly (if you were a landowner). At first, this was a natural reaction, for years values had been stagnant due to the recession of the early nineties that stripped values below historical averages, and pent-up demand was pushing the market to catch up to its historical 6-8% average annual appreciation (no alliteration intended). We saw a few years of above-average appreciation, in the 20%+ range, as the again-healthy market made its attempt at making up for lost time. Okay, cool. We could’ve used two or three years of this.
Then 9/11/01 hits. And our fearless/fearsome leader’s plan to protect our nation’s soverignty? Spend more money! But with wages having been basically stagnant since the seventies, where do we get that money? Tap into that newfound equity in your house, numbskull! Interest rates were through the floor at the time, so instant gratification was just a few mouse clicks, a couple white lies, and a hundred or so initials and signatures on a stack of indecipherable loan documents away. Ah, yes, easy credit. That was the way to keep the economy flowing and growing when there was really no extra cash to spare.
Here is where I start to admit my enormous guilt in perpetuating this whole scam. Clients would come to me, once a year or so, to help them out of the financial holes they’d dug themselves. Someone had ran up all the credit cards, or bought themselves a new car and home theater. Now the bills were coming due, and they wanted to refinance their house and pull out a little of the equity to make the high-interest, short-term debt go away. The value of their house was up more than their expenditures, so they could afford to do it, and the higher mortgage payment was still less than the sum of their current mortgage and other bills, so technically they’d be saving money through taking out a new loan, especially considering the debt from TVs, cars, cosmetics, clothing, and decorative accents would now be tax-deductible. Besides, I tried telling people (much more gently than I’m about to put it) that they were acting like selfish fucktards. At least a few times. Then the ones that were determined went and found someone who’d tell them that moving all their consumer debt into mortgage debt was the smartest move they could make. The deal got done. The mortgage industry pocketed cash on the transaction. My boss tells me my advice cost the company money, and the sucker is no better off (oftentimes worse off) than if I’d simply obliged their desire and found them another loan. I’m on thin ice. Next time, I find a way to find the sucker some money, whether it’s a good idea or not. The next domino in a miles-long chain is set up.