Mortgage Madness (Part 1)


Uploaded by alva0davi on 14.05.2009

Transcript:
IT'S A SCENE PLAYING OUT ALL ACROSS THE COUNTRY:
"MIAMI-DADE POLICE!"
"I'VE TRIED MY HARDEST. I'M SORRY. I'M SO SORRY, HANAH.
THESE ARE THE FACES OF ECONOMIC CATASTROPHE.
"WE'VE GOT A COURT-ORDER HERE
TO GO AHEAD AND PROCEED WITH AN EVICTION TODAY. BASICALLY, THE BANK'S TAKING BACK OVER THE HOUSE,"
PEOPLE LOSING HOMES, PEOPLE LOSING JOBS.
"THIS IS NOT YOUR ORDINARY RUN-OF-THE-MILL RECESSION.
WE ARE GOING THROUGH THE WORST ECONOMIC CRISIS SINCE THE GREAT DEPRESSION."
THE QUESTION IS, "HOW MANY OF US REALLY UNDERSTAND WHY?"
TONIGHT, WE'LL EXPLAIN IT STEP BY STEP.
BUT TO BEGIN, WHAT YOU REALLY NEED TO KNOW
IS THAT MELTDOWN HAPPENED BECAUSE OF THE FAILURE OF THAT "ONE" SIMPLE BUILDING-BLOCK
OF THE AMERICAN ECONOMY: THE MORTGAGE.
"HOME-OWNERSHIP IS THE BASIS OF THE HAPPY, CONTENTED FAMILY LIFE."
WAY BACK WHEN, A MORTGAGE WAS A GREAT WAY FOR THE AVERAGE AMERICAN TO OWN A HOME.
"NOW, THIS IS THE WAY YOUR PAYMENTS WILL WORK OUT."
IT WAS SIMPLE. THE BANK WOULD AGREE TO GIVE YOU A LOAN,
AND YOU'D AGREE TO PAY IT BACK, OVER TIME, WITH INTEREST.
"THIS IS A DREAM COME TRUE FOR US, OWNING OUR OWN HOME."
BANKS WERE CAREFUL ABOUT HOW THEY LOANED MONEY.
THEY NEEDED THAT MONEY PAID BACK TO PROTECT THEIR DEPOSITORS AND STAY IN BUSINESS.
FOR GENERATIONS, IT WORKED.
"WANT TO REFINANCE AND GET CASH? COUNTRY..."
BUT, OH, HOW THINGS HAVE CHANGED.
"I'M AN AMERI-QUEST MORTGAGE SPECIALIST. I'M HERE TO HELP."
BECAUSE IN THE LAST DECADE, IT SEEMED LIKE ANYONE WAS ABLE TO GET A MORTGAGE.
TAKE THE CASE OF PAULA TAYLOR WHO HAD A DREAM OF OWNING HER OWN HOME.
"THE AMERICAN DREAM. I COME FROM A LARGE FAMILY -
THIRTEEN CHILDREN - (I) WANTED A SECOND PEOPLE TO OWN A PIECE OF PROPERTY.
THAT FELT GOOD."
BUT COULD SHE REALLY AFFORD TO OWN A HOME?
A FEW YEARS AGO SHE CONSIDERED HERSELF VIRTUALLY HOMELESS,
SPENDING THE NIGHTS WITH FAMILY AND FRIENDS.
"I WOULD GO TO THE PLACE WHERE I HAD MY STUFF STORED,
LITERALLY PACK IT IN A SUITCASE.
AND THEN, FOR THAT WHOLE WEEK, LIVED OUT OF THE SUITCASE AS I WENT BACK AND FORTH.
THEN SHE SAW A CONDO IN THIS HOUSE NEAR BOSTON.
THE PRICE: OVER A QUARTER MILLION DOLLARS.
SHE SAYS THAT AS A PERSONAL TRAINER,
SHE WAS MAKING LESS THAN $20,000 A YEAR - $1600 A MONTH.
"I REALLY WASN'T EDUCATED IN WHAT IT TAKES TO GET A MORTGAGE.
I KNEW THAT YOU GIVE "THEM" YOUR INFORMATION,
AND THEY RUN THE NUMBERS, AND THEY TELL YOU WHETHER OR NOT YOU CAN AFFORD IT."
THERE'S A FORMULA. I EITHER FIT IN IT OR I DON'T.
"CORRECT."
THE MORTGAGE COMPANY DETERMINED PAULA DID FIT IN,
AND GAVE HER TWO LOANS TO COVER THE FULL AMOUNT OF THE CONDO, $259,900 DOLLARS.
HER MONTHLY PAYMENT ON THOSE LOANS?
MORE THAN $2100 HUNDRED DOLLARS, EVEN THOUGH SHE WAS TAKING IN ONLY $1600 A MONTH.
PAULA PLANNED ON MAKING UP THE DIFFERENCE BY HAVING HER SISTER MOVE IN AND SPLITTING THE COST.
"I WAS ASSURED AFTER A YEAR YOU CAN REFINANCE.
AND SO, IN MY MIND, IF I PAY THIS FOR A YEAR,
THEN I CAN REFINANCE AND GET INTO A BETTER LOAN."
LOANS, LIKE THE ONES PAULA GOT, WERE BEING HANDED OUT BY THE MILLIONS.
AND EVEN SHE NOW WONDERS, "WHY?"
"WHY WOULD THEY TELL ME, AS THE LENDER, THAT I CAN AFFORD THIS
IF THEY KNOW THEY'RE NOT, THEY'RE NOT GOING TO GET THEIR MONEY BACK?"
SOME CONSUMER FINANCE EXPERTS LIKE ELIZABETH WARREN OF HARVARD LAW SCHOOL,
THINKS THERE WAS "METHOD TO THE MADNESS,"
WHICH SHE COMPARES TO SALESMEN HAWKING PRODUCTS THEY KNOW ARE DEFECTIVE.
"THIS IS ABOUT BUYING TOASTERS THAT AT THE MOMENT THEY WERE SOLD,
THE PERSON SELLING THEM KNEW, "THESE THINGS ARE GOING TO EXPLODE."