Okay, there are a million guilty faces in this crisis (besides Alan Greenspan). This is only one of them. But this guy sort of makes me sick. You can read the article if you want to. (But NYT will probably make you register. I'd use bugmenot if it were me.) But whatever you do, DO NOT buy his book. You're already going to be bailing out his mortgage -- probably both on the bank end and on his end. I see no reason to give him any more money. If you don't bother reading it, here's the highlights:
- a financial reporter for the New York Times. Yes, I said financial reporter.
- $120,000 base salary and about $50,000 annual alimony/child support liability, leaving him with a $33,000 take home salary after taxes.
- buys a $460,000 house knowing ahead of time he cannot afford it
- attempts one of those "liar loans" with full knowledge he does not qualify and having written about how stupid they are. (Oh, and full knowledge on the part of the mortgage broker, too.)
- gets rejected on the liar loan ... due to, well -- what appears to be excessive lying
- reapplies for a "no ratio loan" (which to me seems to be just another type of liar loan) with some seemingly ridiculous piggy back loan -- both primary and secondary loans have a rate adjustment in 5 years.
- very little down, no emergency fund, living paycheck to paycheck... and broke and unable to make the payments in 5 months.
- no change in spending habits when they bought into their "dream" -- high end groceries, Starbucks, clothes, vacations, big christmases
- began to finance daily expenses on their credit card to the tune of about $50,000
- refinanced the house (you know, they always go up in value) into one of those famous subprime loans and tossed the credit cards into the house payment -- turning stupid unsecured debt into stupid secured debt "because of the great tax write off". Yeah, now non-payment on your new tie and half-caff latte will put your ass on the curb. Smart.
- refinanced again. (geez, I hate to see how much closing fees this guy paid.... oh, wait, I bet those are tax deductible. That makes it "smart.") This time he'd brought his FICO up because he had actually paid his bills (with his house) and had lots of available credit.
- puts a little dig into his wife, who at this time loses her job. Never you mind that there is no cushion. Never you mind that they are living at about twice their means. The financial genius makes it her fault. (Don't get me wrong, she's partially to blame here. Marriage is a business partnership.)
- gloats that he "outlasted" the original mortgage lender, who went belly up. This, to me, is a way of saying that the taxpayer was already on the hook for the mortgage.
- is offered a "catch up plan" by the 3rd generation mortgage rescuer. This plan is where he pays more per month and gets forgiven, yet he choses to let the mortgage go unpaid longer so he can see what sort of (probably government backed) loan modification program he can qualify for. Oddly, there's no talk of earning and banking that $3700 a month payment -- you know, just in case the modification comes through. Maybe he did. I have my doubts.
Sadly, the article ends with no mention of if (or how) he got out of the mess. My guess is that he's still in it... and hoping you'll buy his book to bail him out.
This is the face I now have on the whole situation. Forget the "poor me, I didn't understand, the bankers took advantage of me" guy. Mortgages should be understandable by someone that passed 6th grade math. It isn't that complicated. If it is, then -- well, maybe that's a sign you shouldn't be doing it. This makes me an even bigger fan of the Dave Ramsey crowd. There is no freedom like the freedom of owning your own life. Sure, there are days I panic. I've been out of a job for almost 3 years now. And I've lost lots of stock market opportunity by not being able to invest like I would like to in the down market. But, here I sit, still living on my own dime... and still friends with my wife.
So tell me: Why are we bailing out these people? If you ask me, both the borrowers and lenders here should be prosecuted for fraud, not bailed out.