LOOK through squinted eyes and you can still see what once attracted people to
Cleveland’s Slavic Village.
The area took its name from the Czech and Polish immigrants who settled there
in the mid-19th century to work the city’s wool and steel mills. Its
tree-lined streets and attractive, wood-framed homes were once home to a
community filled with factory workers, young families and first-time
homebuyers.
Small pockets still have that family feel, but decline set in during the 1980s
as those jobs moved overseas and drug dealers and violence moved in. The
city authorities cracked down, local people rallied round, and until a few
years ago residents said life in the village seemed to be improving again.
Then came the sub-prime debacle.
Now Slavic Village looks as if it has been hit by a hurricane. And this
man-made disaster rivals hurricane Katrina when it comes to displacing
families. The 2005 storm displaced some 35,000 people in the worst-hit
districts of New Orleans. Since 2003 34,156 people have lost their homes to
repossession in the Cleveland area, according to Case Western Reserve
University, and the pace of those losses is accelerating. The new year is
barely two months old and so far there have been 1,857 foreclosures in the
Cleveland area.
Slavic Village has street after empty street of boarded-up houses, their roofs
caving in, collapsed balconies hanging from the fronts of buildings. Some
people seem to have just upped and left, leaving their belongings behind for
the rats and vandals. Owners have put up signs offering their burnt-out
homes for a $500 (£250) downpayment.
Bins and rubbish litter the street. Signs warn trespassers the structures are
unsafe. People have spray-painted “No copper” or “No metal” on their doors
to deter crooks who have stripped anything of value from these decaying
shells. Even brick steps have been ripped off, leaving houses that look as
if they are floating on a dark sea of garbage.
Slavic Village is Ground Zero for a tragedy being repeated across America. The
dramatic rise and fall of the sub-prime mortgage market has left borrowers
across the country facing repossession. In 2002 there were 101 foreclosures
in Cleveland. In 2005 the number was 2,000, last year it was almost 8,000.
Across America the number of foreclosures rose 79% last year, according to
Realtytrac, an American property analyst, as people, many of whom would
never have received loans in the past, have failed to keep up their mortgage
payments.
Similar, and in some cases worse, situations can be found in cities from
California and Nevada to Michigan. The reverberations from this crisis have
been felt across the world, wiping billions off the value of banks’
investments and making them reluctant to lend money even to each other, a
problem that drove Britain’s Northern Rock to the edge of collapse.
Cleveland’s mayor Frank Jackson knows who to blame: Wall Street. The mayor’s
office is suing some of the world’s biggest banks. including Citigroup,
Goldman Sachs, HSBC and Royal Bank of Scotland’s Greenwich Capital, claiming
they acted like organised criminals financing the sale of products that they
knew could do nothing but harm to Cleveland. Sub-prime mortgages have proved
as bad as drugs in the destruction they have wrought on the community, he
said.
“Follow the money,” said Jackson. “If you ask organised crime figures why they
persist in doing what they are doing, knowing the damage they are doing and
the risks they are taking if they are held accountable, do you know what
they will say to you? The money was just too good. You ask these financiers
on Wall Street why they persist in doing this when they know the risks they
are running and the damage they are doing to their communities and
shareholders, do you know what they will tell you? The money was just too
good.”
Low interest rates and rising house prices convinced Wall Street that
sub-prime loans were a safe bet. With Wall Street’s blessing a once niche
and – frankly – dodgy product aimed at borrowers with bad credit histories
went mainstream.
The mayor’s writ sets out in black and white just how much money was once
available in this market. Brokers targeted people in areas like Slavic
Village offering loans to people with poor credit records. Those loans were
then pooled together (securitised) and sold on to investors. If a few
failed, there were others to pick up the loss and, if house prices rose,
repossession would cover the debt.
RBS’s Greenwich Capital underwrote more than $180 billion in securities backed
by sub-prime mortgages, according to the suit. HSBC issued more than $200
billion in such securities and also made loans to people through Household
Finance, its sub-prime lending arm. Between 2004 and 2007, the suit states,
HSBC moved to foreclose on 1,300 loans in the Cleveland area.
When the sub-prime mortgage market imploded, HSBC and its rivals lost billions
but their debt to Cleveland has yet to be paid, said Jackson. The city’s
property taxes are falling, people are leaving the city. As the city’s
income falls, its expenses are rising. Vacant properties attract crime.
Arson rates are soaring. Cleveland used to spend $1.7m a year tearing down
abandoned properties. Last year that figure had reached $6m – as far as the
budget would stretch. “We tore down 1,000 structures and we didn’t make a
dent,” said Jackson.
“They created the demand and in a market like ours that was completely unable
to withstand the failures that arose. We did not have the increase in the
real-estate markets that other areas of the country experienced. We have had
a difficult economy over the past decade as we have moved from a
manufacturing economy to a services economy. We have struggled here. They
created an environment where there was no other outcome than the
foreclosures. We saw it coming. How could Wall Street not see it coming?”
Many others take the same view. “They knew,” said Robert Triozzi,” Cleveland’s
director of law. “They knew.”
TWO YEARS AGO Aquila Eberhardt saw an advertisement in the local paper
offering loans to people with poor credit histories. The 29-year-old single
mother had not worked for three years and had trouble keeping up with
credit-card payments.
“The advertisement said that if I looked at this house they would put me up in
a hotel,” she said.
At the time her social-security benefits were worth about $1,400 a month and
she had $1,300 in savings. A week after she visited the offices of a local
estate agent she had a loan for $103,589 and had become a first-time
homebuyer. “I thought this is crazy. I told them I didn’t even have any pay
slips to show them. They told me I would be okay and that I could afford it
because I would be paying about $400 a month.”
Almost as soon as she moved into the three-bedroom house in Slavic Village she
was horrified to receive her first mortgage bill for $681, a figure she says
she cannot afford and one she has struggled to keep up with ever since. The
house is in disrepair. She lives in dread that something will happen to the
roof, which she cannot afford to fix. Neighbours have moved out; their
houses have been boarded up. But Eberhardt says she has nowhere else to go.
On March 17 she must go to court and face eviction.
Credit checks, ignored when she took out her loans, are in vogue again at
financial institutions. Eberhardt’s credit score has been further destroyed
by her home-loan disaster, making it all but impossible for her to pass the
financial checks set by most landlords. In pursuing the dream of
homeownership she has lost her life savings, what was left of her
creditworthiness and is now set to lose her home.
“I don’t think I should ever have been given this loan, but they tricked
me. If I knew I was going to get into this big a mess, I would never have
done it,” said Eberhardt.
Barbara Anderson, 60, has lived in Slavic Village for 25 years and says
predatory lending is nothing new. Anderson, a community activist who is now
a city liaison officer, nearly lost her own home in the 1990s when a new
loan company took it over and her interest rate shot up from 7% to 20%. The
unscrupulous have always targeted the poor. What’s different now is the
scale of the problem, she said.
“Why would a bank want to harass me? Why are they so concerned about me paying
an extra $40?” she said. “Because I was isolated I thought it was just me.
It wasn’t about just me it’s about the terrorisation of a whole city,” said
Anderson.
She feels the banks should take the biggest share of the blame, but homebuyers
have some responsibility too she said: “The papers you sign affect an entire
city. When something happens to your loan it affects me. If something
happens to your loan, it affects my taxes, it brings down my house’s value,
it adds a criminal element. It’s a terror to the neighbourhood.
“Somebody once said we have found the smoking gun and everyone’s fingerprints
are on it,” she said. “That’s how I feel about it. We all can take some
blame for some of this.”
THE CRISIS is likely to get worse before it gets better. As home prices fall
and lending standards tighten, more people are defaulting on their
mortgages, potentially causing billions of dollars in additional losses.
Some 1.6m mortgage holders defaulted on home loans last year, and at least
that many are expected to default this year, according to Moody’s
Economy.com, a financial website.
A December 2006 study by the Center for Responsible Lending (CRL), a
Washington-based lobby group, predicted that sub-prime foreclosures would
cost American households as much as $164 billion. The nationwide study
predicted that 19.4% of such loans taken out between 2005 and 2006 would
fail.
Even during the period of strongly rising house prices, sub-prime foreclosures
were high. Some 13% of these home loans ended in foreclosure within five
years of being taken out, according to CRL.
And those rising house prices masked another problem that is only now starting
to emerge. Many homeowners who were struggling with their loans were using
equity from their rising house price to refinance their mortgages. With the
housing boom over, and lenders tightening their standards, troubled
borrowers could end up without the equity they need to refinance their loan
or to sell their home and pay off their loans. According to the CRL, when
these distressed borrowers are added to the foreclosure rates, the total
“failure rate” for sub-prime loans approaches 25%.
Rather than a stepping stone to standard loans, as their champions once
promoted them, sub-prime loans have left borrowers mired in spiralling
debts. The CRL report said: “In reality, many borrowers refinance from one
sub-prime loan to another, losing equity each time to cover the cost of
getting a new loan. When we analyse the likelihood of foreclosure for
borrowers who repeatedly refinance, we find that the risk of losing the home
climbs to 36%.”
Last month the CRL put out a new report “Sub-prime Spillover” that attempted
to quantify the impact of the crisis on the larger community. According to
the report, foreclosures on sub-prime home loans originated in 2005 and 2006
will devalue the properties of 40.6m neighbouring homes. Homeowners living
near foreclosed properties will see their property values decrease $5,000 on
average. The report estimates that the total decline in house values and tax
base from nearby foreclosures will be $202 billion.
“For all the headlines we are seeing, this situation is going to get worse,”
said Kathleen Day, a CRL spokeswoman. “There has been irresponsibility all
along the line. Many of these loans were made to people who never had the
ability to repay. It’s ridiculous, like selling someone a car without a
steering wheel and then being surprised when they crash. Sub-prime loans
need not be bad but once you stop assessing the borrowers’ ability to pay
and the interest payments don’t reflect the borrowers’ ability to pay,
that’s crazy.”
NEXT WEEK Ohio gets its chance to vote for the Republican and Democrat
candidates who will fight it out to be the next president. Anderson set out
her views to the Democrat front-runner Barack Obama during a recent visit:
“Families that used to sit in their homes around the kitchen table are now
sitting around a steering wheel. Some children who should be in their beds
at night are laying in the backseats of cars. Their closets are the trunks
of those cars and what should be a personal bathroom is now a bathroom in
any public area. It ain’t right,” she told the senator.
“It ain’t right,” repeated the senator. He didn’t offer much else by way of
solution.
As the crisis gets worse, so will the clamour for action. So far there has
been a cool reception to President George Bush’s latest action plan. Project
Lifeline is backed by six big mortgage lenders and aims to slow the rising
tide of foreclosures. Borrowers who are at least three months behind on
mortgage payments can apply to the lender for a 30-day “pause” on
foreclosure proceedings. If the delay is granted, then borrower and lender
can work out a more affordable repayment scheme. Bankrupt homeowners or
those who face foreclosure within the next month do not qualify.
The new plan follows a programme announced in December that would freeze
interest rates on certain sub-prime loans. Unlike that effort, this plan
will apply to all home mortgages.
Reaction was tepid at best. An analysis by Economy.com found that 425,000
households would be eligible to benefit, but in practice only a fraction of
that number would be helped. Day said the government was both
underestimating the problem and overestimating the ability of the industry
to deal with it.
And as home prices fall and lending standards tighten, borrowers further up
the economic ladder are starting to feel the pinch. In middle-class Maple
Heights, a Cleveland suburb just 15 minutes drive from Slavic Village,
foreclosures are starting to take their toll.
“This is a white-collar, upper-middle-class neighbourhood,” said Lindsey
Sacher of East Side Organizing Project, a Cleveland nonprofit group. “But
people got sick and then they couldn’t afford their payments.”
Now with debts mounting and home values falling “people are just leaving this
city. If you look at the areas of the country that are losing the most
population, this region is number six. Numbers one to five are areas hit by
hurricane Katrina,” said Sacher.
“We are hoping the next president will have some comprehensive plan to work
this out.”
The rest of the world will be hoping so, too.
THE CRISIS IN FIGURES
Number of families with a sub-prime mortgage: 7.2m
Proportion of sub-prime mortgages in default: 14.4%
Sub-prime loans outstanding: $1,300 billion
Sub-prime loans outstanding in 2003: $332 billion
Percentage increase from 2003: 292%
Proportion of loans approved without fully documented income: 43%-50%
Number of sub-prime mortgages that will have their interest rate reset this
year: 1.8m
Typical rise in monthly payment (third year): 30%-50%
Sub-prime share of all new mortgages in 2006: 28%
Sub-prime share of all new mortgages in 2003: 8%
Number of homes not in foreclosure whose value will decline in 2008-9 as
sub-prime foreclosures lower the prices of surrounding homes: 45m
Value of that decline: $233 billion
The Federal Government strong-armed Banks and other lending institutions to lend to peole who did not qualify. When one can buy a house with zero down and zero credit checks, guess what-chaos. Of course the Polititions have long gone, and left the people.
Desmond Taylor, Houston, USA Tx
It's a western world problem. The older I get the more I see the merit's of communism. Greed, exploitation, self serving governments? Is this what life's all about? No wonder anti depressant prescriptions are going through the roof! The politicians must be held accountable as only they can stop this madness with credit.
Neil, Birmingham, U.K
Where were the federal regulators during the sub-prime lending frenzy? Why is it that no one is talking about this?
R J D, San Diego, CA
I live in Colorado, USA 2007, usually in Portland, Oregon. Couldn't afford a small apartment on SS so am living with son. At one time we lived in an older neighborhood such as in the pictures, but not in disrepair, just the age of housing. Those houses look as though they never would have passed mortgage inspection in the last 10 years. (tried real estate for one year in 1977). I could be wrong but I don't see how a roof would deteriorate to those conditions so quickly if it wasn't already needing repair. Who passed those houses for mortgages, and why aren't they being prosecuted? I agree it was folly all around. I am so afraid for everyone, this is terrible, and worldwide to some degree; that is the inability to keep up horrible payments. Realtors have, by law and license a fiduciary responsibility toclients.. we will soon be glad for Daily Bread, since speculators are trying to squeeze money out of wheat. Where is wisdom?Conscience? PLAIN TRUTH.?. Grandma PKK
Penny K, Westminster, Colorado, USA
Lenders' greed, dishonesty, and lack of a positive moral standing along side the mediocre education and false sense of security they instill in the buyer is a major contributing factor to the current housing crisis. Cleveland has less than a 29% high school graduation rate. This level of education has a direct correlation with the sub-prime crisis facing most of Cleveland.
During the Depression property taxes fell by the wayside as sale and income taxes rose to fill the gap due to the broken economy, thus effecting the educational system. Property taxes now act as an essential life-line to our educational system. As the as the situation in Cleveland becomes more dire, the responsibility for proper school funding is placed as a heavy weight on the Cuyahoga County tax payers' shoulders. Are Cleveland's residents and weakened economy able to withstand the additional blows that are yet to come? And as a prior resident of Cleveland for 22 years and an educator I hope only for the best.
Kristen, Clarksville, TN
Governments have a responsibility to look after the nation's health and well-being. The pendulum has swung way too far in favour of big business.
This is also why we have such problems with alcohol in the UK: the interests of businesses being put before public health.
You can criticise the people who took on these mortgages. But consider for a moment that in the UK half the workforce (up to 16m) has a reading and writing age equivalent to that expected of children leaving primary school (a fact that was mentioned in a Commons Public Accounts Committee report in 2006).
The government in the US and UK are failing these people.
Robert, Manchester, UK
Banks have always been the same, they will leand you an umbrella when the sun is out but want it back as soon as it rains!
It has always been the same with all the house price crashes in the kast 50years.
R Ellis, east devon, devon
This is the big Meltdown. The American Empire has died and the death throes are filtering down to the citizens now. It was fun while it lasted but it's over folks. You could have had Marxist Socialism but that was too radical, now no none wants to save us. Picture one vast dessert from New York to San Francisco and you will get the picture!
Richard Neva, Norwich, NY
I wish people would wake up and realise that all mortgage lenders are loan sharks. With the Coventry Building Society having only just stopped offering 125% mortgages, I expect we'll be twinned with Cleveland fairly soon. We have next to no industry left here and yet property prices have kept rising. The Specials said it all about ghost towns back in 1981.
Paul, Coventry,
Somebody should consider the principle of the Keynes theory? Thats why we are in this mess in the first place!
Gee, lets spend MORE money so our dollar has even less value. Buy land, gold and silver bars, and make sure you are far, far away from American cities.
Franklin, Washington, District of Columbia
Somebody should consider the principle of the Keynes theory - give them a house and home, a new chance and re-stimulate confidence.
Robbie Rohan, Great Chart, Kent, UK
Cleveland has long been known as 'The Mistake On The Lake'.
Eric, Ottawa, Canada
Even now, there are American fools who rush forward to defend Bush, the most inept figurehead of our time. even while their infrastructure literally crumbles beneath their feet.
No, the myriad issues the US today did not start with Bush, but neither he, his father the first Bush, nor even Clinton did anything to stop them. Another Clinton won't turn around the country's fortunes now, and I doubt if Obama can seriously even begin to try. Ron Paul and Dennis Kucinich areis probably the only candidate who get it, but they are marginalized as extremists.
EJ, Cleveland, Ohio
Stephen Clark,
It must be nice to live in Boston, which has thrived economically since the 1600s, has 40 colleges and universities, a highly-educated and high-earning population, and the closest thing to universal healthcare in the US. Come spend five minutes in the Fairfax, Mount Pleasant, or Slavic Village neighborhoods of Cleveland and then try preaching your "you're all idiots" garbage.
I have worked with bankruptcies and foreclosures, and the #1 cause of both is unpaid medical bills--including bills accumulated by those who HAVE INSURANCE.
When someone is never taught basic financial literacy--a massive failing of the US educational system, and signs an ARM under promises of an affordable payment, who is at fault? Is it the ill-informed consumer or the lending institution who not only knows the rules, but wrote the rules?
When your mortgage payment jumps each month and you then encounter a massive medical bill, you're screwed. It happens here every hour.
Kevin Kovach, Cleveland, Ohio, USA
To the ill-informed Clevelander who alleged that Cuyahoga County stands to gain from this foreclosure-induced exodus:
GET A CLUE
Evertime a property is foreclosed, the schools lose all of the property tax that should have been generated from that property. Since Ohio funds its schools via property taxes, that means that every foreclosed house guts school funding.
4/100 Cleveland high school students earn a bachelor's degree. 7.5% of Cleveland residents are college graduates. Now we're gutting school funding even worse, and people who can afford it are again moving to the suburbs, further damaging our schools.
Including all of the legal and processing fees the county eats for foreclosed parcels, Cuyahoga County loses MILLIONS from this crisis. There is NO gain in any way, shape, or form.
Kevin Kovach, Cleveland, Ohio, USA
I beileve the financial institutions (Wall Street) should bear the brunt of thsi crisis. Either they change the terms of the loan, or take a huge hit and take the losses. Since the crisis occured due to excessive greed, they should also shoulder the responsibility and accept the losses. Bit pathetic crying 'wolf' now.
See no reason why ordinary taxpayers who resisted the greed should bail the mortgage companies now; or investors that made bad decisions based yet agagin on greed.
Praf, Los Angeles,
Everything is sub-prime in the USA. Its dollar, its social security, its medical cover, its car industry....need I go on? How can the nation that once led the world and captured the imagination of all free people destroy itself like this? Your founding fathers must be spinning in their graves. The sooner the US Fed allows America to crash financially, the sooner the cleansing can begin. Until then, denial about your reality will preclude you from recovering your destiny, your dignity, your lives.
Peter, Sydney , Australia
There are many parties involved that have earned through circumstances to have a finger pointed at them. Lower-income people who were not educated enough, polical office holders who didn't raise any flags and lenders (stupid) enough to issue loans for thousands of dollars without verifying sources of income or doing credit checks. It shares some of the flavour (or stink) of pre-approved credit card solicitations that hit the banks and lending institutions but a few years back. It would appear that, yes, that the bane of Gordon Gekko, greed, has again infected our everyday affairs and upended the apple cart. What crisis in history has not had an element of greed push human behavior beyond sensible limits? For all that I have read, there are pluses and minuses that these events present. But it begs the question: what wall of the human tide of want drive us into next?
Brian C., Chicago, IL
Remember the Savings & Loan scandals? The government set up the Resolutuion Trust Corp. to sell off remaining assets of the S & L's. It was then estimated that it would take the U.S. Taxpayers 35 years to pay off the indebtedness. The present scandal is far, far worse. Just like the S & L crisis, it will be the U.S. Taxpayers who will eventually pay the bill, not the banks or other lenders. The Federal Reserve Board is already providing them with billions in liquidity. Uttimately, everyone's children, grandchildren, and great granchildren will be paying fof this mess. We are still paying for the S & L crisis.
Robert Greenwood, Las Vegas, Nevada USA
If people buy a home they cannot afford they have no-one to blame but themselves. If they are poor or financially unsophisticated they either need to accept they will never be homeowners or need to get someone to help them understand what they are getting into. Those who bought homes worth 10x income with no money down would have made out like bandits if house prices had kept on going up. If they were willing to benefit from the potential upside they have to be willing to accept the downside - there should be no reward without risk and it is quite wrong to expect people who didn't overreach themselves - often those on modest or low incomes who sensibly realised they couldn't afford these homes - to underwrite the risk-taking of others.
This has nothing to do with Bush (if anything, the lawmakers to blame are those in the 1980s and 1990s who relaxed banking regulation) and everything to do with personal responsibility.
Stephen Clark, Boston, USA
The situation is getting worse in Britain. Just wait until people stop spending money, business's go bust, people are laid off, mortgage payments are not made on big loans and soon the country will be suffering in a similar situation to that in the US
Phil de Buquet, Newport, England
One law everyone should follow always! If you don't understand what you are doing, then find an expert to help you! Now it is true that most people don't know a real estate person or Bank loan officer, but they do know their local minister or barber or someone, that does know the expert.
Find that person and ask them.
Dave, Orangevale, California, USA
This is such a tragedy; my heart goes out to those who have been repossed. Its a scandal that £3trillion dollars has been spent on a futile war whilst only a fist full of dollars has been thrown at this problem.
I always thought Bush would bankrupt America and it seems he is doing a fine job of it.
It's uncomfortable viewing.
jane, oxford, uk
Dropping home prices are bad for home owners, but good for home buyers. Many families that could not afford a home during the housing bubble can afford one at the new prices.
Joseph, NYC, USA
Hi
As an American I hope that the government will pass a program to help save communities. But many here are asking why should we (the taxpayers) pay for people who knew they could not afford their homes. I feel for these people but as a senior citizen that has watched our budget for years I do not feel that we should bail them out.
D Winkler, Jarrettsville, MD/USA
I disagree with the article's title - "America’s loan scandal". No borrower was forced to borrow. Laws about disclosure were not broken. People got in over their heads and lenders let them. Both are paying the price in addition to the purchasers of the debt in the secondary market. Every market mechanism has worked. When things go south everyone cries "victim", including the mayor of Cleveland. He wasn't complaining when all those nice new homes with tax-paying people were moving in was he?
Jim, Toronto, Canada
So why don't these people just rent? It's the bank that is taking the loss, not them.
Toney, Cleveland, OH
Wouldn't the lenders be better off if they allowed the bankrupt borrowers to stay on as rent paying tenants? That way houses would retain some value instead of becoming wrecks.
roger sykes, christchurch,
I suspect that the next decade in the US isgoing to be similar to the 1930's.That ended in World War 2,but at least without Bush in power,the next decade will be safer for everyone.
stephen hulton, eure, france
If financial impropriety has the potential to turn into a financial crsis and then onto an economic crisis, then it is the Leader's responsibility to ensure that the regulation of the industry is appropriate and further, that appropriate checks are in place to safeguard the vunerable. Not everyone can read & write as well as some of the correspondents here - think back to dot com - the regulation of the companies who were auditing, broking and advising the dot come companies were the same in some cases - the law changed and this is no longer allowed. The horse has bolted again here but no doubt some pampered politicans will get around to working out what went wrong eventually
Joseph S, Edinburgh, Scotland
Back in the seventies, in Australia, a blunt Aussie was reported as saying , in effect, 'there is a class of people who should not be encouraged to become homeowners'. and was immediately shouted down as a snob and worse. I am reminded of this by the tragic affair of the sub prime fiasco in America. The loudest shouts were probably from those making money out of it.. After the bull dozers have moved in, perhaps community housing should be built on the land to rehouse the disposessed? of course they were silly to take on an unpayable mortgage, but the buck hasn't stopped yet, the middle classes are going the same way.
mary hodgson, Coventry, warwickshire.
With horror stories like this, what are potential mortgage borrowers now supposed to do? As consumers attempt to refinance out of adjustable-rate mortgages in 2008, they are scared to death that they will be the next victims of predatory lending and possibly foreclosure!
I am a former senior loan officer for a regional mortgage bank here in Ohio. It made me sick to see how we took advantage of consumers like this for thousands of extra dollars.
For example, because you didn't actually write a check for the amount, how do you know if you weren't overcharged thousands of dollars on your last mortgage?
So I developed this simple Mortgage Loan Comparison Worksheet. If borrowers just used this easy tool when shopping around for a mortgage, predatory lending and the resulting foreclosures in this country could virtually be eradicated:
http://www.januspresentations.com/MortgageLoanComparisonWorksheet.pdf
Ted Janusz, Columbus, Ohio USA
This is a more sophisticated form of ethnic cleansing being undertaken America in the 21st century. Back in the late 19th and early 20th century "Banishment (leave or be lynched) was the method of choice. Where is the ACLU to help these poor people?
Annserina, Roseau, Dominica
Notice that the government does not take any blame. If memory serves, the Clinton administration threatened lenders with court action because their lending practices were "discriminatory". When the banks pointed out that the minority people they did not loan to had poor credit, Clinton sent in the lawyers and the banks cut their losses (short term). Well, the chickens finally have come home to roost and memories are short. When will people learn that government is not your friend in most cases and to beware of polititians finding enemies in the dark?
doh, cincinnati, usa
Good Morning ...
Blame not only the financial institutions ... but local government that turned a blind eye to the new valuations the financial institutions appraisers gave to homes - valuations that far exceeded their government appraised value for tax purposes. And why should the local county auditor complain - because as a transfer tax is assessed on the new inflated value - and the local county government stands to fatten its coffers!
Boniface, Cleveland, Ohio
Phil how can the Government regulate stupidity? If there are people taking on debt that they can't service and an equal number of institutions prepared to lend these poor sops money then, they are a match made in heaven. It’s called The Market. And every so often markets become distorted and bent out of shape. In this case The Market mis-priced risk fuelled by well-known human trait: GREED.
The people took on debt to buy a house so they could plug into The American Dream with the aim of making money and the people who lent them the money were betting on house prices continuing to go North. The problem is, house prices reached dizzzy heights and ran out of oxygen which has left world-wide institutions nursing losses and the homeowners back in the trailer-parks.
How do you regulate that? People cry for protectionism and State Aid (please see Northern Rock) when it all goes wrong. It is not the fault of Governments but the fallibility of human nature & capitalism.
Simon, Eltham, London
Bush did it? George Bush is President of the US, not of CountryWide. Any idiot that loans money in such foolish ways will soon have defaults that destroy them. As it should be. The LOANERS are mostly to blame. The loanees hold some blame, but the temptation was so big. Bless those poor souls, and those poor neighborhoods. And guess what? The Gov'ment can't fix it, but "we the people" can. A return to the values of the Great Depression generation would go far toward fixing a lot things around here.
Randall, Atoka, TN
For every greedy lender, there was a greedy (and perhaps stupid) borrower who knew they could not afford the mortgage payments! Look at the photos? Do they look as if the new owners did ANYTHING to repair those properties?
Yes, too many lenders will give credit to anyone who can fog a mirror, just passing on the losses to the reliable borrowers. But the lenders are not the only ones to blame; it is the greedy over-consumers who cause it as well. Too many people do not care about going into bankruptcy.
A pity there are no longer debtors prisons to lock up both parties!
Bob Evans, Anaheim, California
Are these photos of UBS' back office?
peter, reading, berks
The subprime collapse is only part of the story. The other part of the story is the effect that offshoring of good paying jobs and replacing them with dead end, low paid service jobs has had on these people. Their health insurance left with the good jobs, leaving them with even more expenses.
When they first took out their iffy paper, their prospects were much better. However, 7 years of the Bush government have given us a falling dollar, rising prices, disappearing jobs, and depressed wages.
I don't know what else this government expected, unless they were hoping it wouldn't hit the fan until they were ready to leave so they could blame it on the next guy.
This isn't the only new ghost town in this country.
Warpster, Albuquerque, NM/USA
Where was any government regulation?
Phil Davy, Eltham,