Tuesday, November 20, 2007

Give Thanks I

Bob Herbert tells us how the housing market bubble burst all over one disabled woman in her sixties:

Like vultures, the mortgage lenders began circling the single-family house with the tiny front lawn on Merrill Avenue.

They knew that the woman who owned the house was old and sick and that her two aging daughters were struggling with illness and poverty as well. That was all to the good as far as the lenders were concerned. The predator's mission is to home in on the vulnerable.

"The people that wanted to put through the loan called me about a hundred times," said Rosa Dailey, who is 65 and going blind and needs an oxygen tank at times to help her breathe. "I kept telling them no, because I didn't think we could afford it. But they kept saying how it was to our advantage. So I finally said: 'All right, let's see what we can do.' "


That was the beginning of a tragic spiral, with one unaffordable loan following another. As Ms. Dailey put it: "I feel like they led me down a dark alley."

Ms. Dailey told me her story in the freezing living room of the house on Merrill Avenue, which no longer has a working furnace and is growing shabbier by the day. It's all she has left. Her mother and her older sister are dead now. Her only income is about $1,300 a month from Social Security — less than the monthly note on the house, which is in foreclosure proceedings.

One aspect of the so-called mortgage crisis that hasn't been adequately explored is the extent to which predatory lenders have committed fraud against vulnerable homeowners. They have pushed overpriced loans and outlandish fees on hapless victims who didn't understand — and could not possibly have met — the terms of the contracts they signed.

I guess we could all say thanks for not being Ms. Dailey, at least yet. Many people probably did take badly thought-out loans because of greed or gullibility. But the case of Ms. Dailey is unlikely to be a unique one. It's still not uncommon for ordinary people to view bankers or lenders as professionals, as people in a trusted role, as people who will tell you, with a heavy and serious tone of voice, if you really can't afford that mortgage you set your heart on. This is how mortgage lenders have been regarded for quite a long time. And my guess is that Ms. Dailey believed the lenders. If they said that she could afford the loan and that it would make her payments smaller, well, they must be right, given that they know all those technical terms and wear three-piece suits and so on.

It's almost as if your physician suddenly turned on you and started feeding you drugs you don't really need or urging you to have unnecessary operations. Such physicians do exist but they are rare, because the legal framework and training is geared towards making physicians behave in a different manner, that of a trusted professional. When did this change about bankers and mortgage lenders?

Ms. Dailey is going to have corn flakes and canned vegetables for Thanksgiving, while sitting in her cold house.