Letters to the Editor
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How this happened
Generally, in this country, people are responsible for getting themselves a good deal.
In my own life, I have gotten many rotten deals on stuff like a quart of milk, car repairs, consumer electronics, a college education, and on and on. The reason? I didn't take the time and effort to inform myself about what stuff should cost and what stuff is really worth. I just bought and much buyer's remorse followed.
People who qualify for A credit financing, who take subprime deals have done themselves a bad turn. Sure the broker could have looked out for them, but why would we expect the broker to act against their own interest and offer a better deal at their own expense? It makes more sense to expect the borrower to worry about saving money than to expect the broker to worry about saving the borrower money.
When confronted with all the borrowing options, most people are flummoxed. Most people who got good deals did so through good luck. Its hard to follow all of the details of the transaction and properly asses the time/value of money issues involved. Most smart people I know (including many white guys) are utterly clueless about borrowing and they all have owned multiple homes in their lives.
Also, some people who grew up poor or lower middle class are so thrilled to qualify for a mortgage that they don't dare question the terms. For those people the problem of getting a mortgage has historically been one of avoiding rejection, not a problem of avioding getting ripped off.
In inner cities many people have poor credit, little for down payments and spotty income. Many brokers who focus on those areas feature sub-prime products prominently in their offerings. They get in the habbit of offering products that anyone can qualify for. They don't think about costs, since so many of their customers are price insensitive and have qualifying issues. The habits become ingrained and even when an A credit customer crosses their path, they reach for the 2/28 program with the hard pre-pay and a libor idex with a six percent margin (this is a bad loan).
Regulators will make some noise for a while, but, at the end of the day, it is really the customers who can best protect themselves from harm, if they are empowered. This empowerment has to take the form of increased knowlege but also increased self-respect and the increased expectations that come with self-respect. That, plus urging more brokers(including low cost ones), not fewer to invest in inner city operations would do a lot to prevent a repeat of the really unfair and disproportionate suffering of the people discussed in this post.
As for the general suffering that comes with the end of every boom cycle, well, that's just the way it goes sometimes. Live and learn.
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Don't ignore how many of these home loans are being paid for through
exhorbitant child support while Dad lives in a old, 2br with no air or pool, and struggles to see his kids.
Since to mom it was free money, it's sort of an easy come easy go situation.
In California, e.g., I was paying $2500 per month for two kids not of school age. Meantime Mom had two mortgages going and a new car.
Seemed odd to me in my 15 year old clunker and in my 2BR apartment.
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Good grief
Yeah, and see hundreds of thousands of women who'd love to have a 15-year-old car and a 2-bedroom apartment.
Heaven forbid that we should actually address discriminatory lending practices.
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Not surprising at all
There is a study (Ayres study) done about how race and gender affect the prices that car salesman quote to customers. In the study male and female, black and white testers who are sent out to car dealerships, and all gave the car salesmen the same set of facts. They were all roughly the same age (late twenties). They all drove the same kind of car into the lot. They all dressed neatly and conservatively. They identified themselves as college-educated professionals (sample job: systems analyst at a bank). And they said they lived in the upper-income Chicago neighborhood of Streeterville.
The results were that on average the white guy is quoted a car at on average $1000 less than the black man, and the women also get worse deals than the white man.
So, if thats how car salesman act when confronted by the same background for people, then why not home loan salesmen? Cars and homes are similar "big ticket" purchases, with a lot of cultural image attached to them. It is absolutely no surprise to me that when confronted with exactly the same set of background information on 2 loan applicants, the men get a better deal than the women (and especially the black women). It goes on all the time. The only reason you don't see it more is that home loans and cars are individual purchases, they aren't the sort of thing sitting on the shelves in walmart. But if walmart was a haggle-based system, you'd better believe that a pack of gum would cost $1 for a white man, and $2 for a black woman.
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The plural of anecdote
Is not data
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This is total B.S.
Another lame P.C. "women are oppressed" anecdote.
Don't object to it, or else you will be branded as a sexist...
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Thanks for reporting on this
My attitude toward the mortgage meltdown, until now, has been: "Borrowers were greedy and materialistic and they got what they deserved in the end."
I found this post and the op-ed behind it very eye- and mind-opening. Thanks very much.
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If I understand Rowyna, then we should be more focused on black men than on white women
Do I have that right?
Black men according to the red starred post have it the worst?
Then the women?
Then the patriarchy?
So why should we give a shit about the women at this time? In the name of justice and fairness, we should be fighting to help out the black guys first, right Catherine?
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Total BS.
As a "home loan salesman" (known in the industry as an originator), I call BS on this whole racism and sexism thing. From my 12 years in this business, I've engaged in every type of lending--bank loans to government loans to subprime. My demographics are a rainbow, having worked across the spectrum of age, sex, race, color, and nationality, and I can make only one blanket statement: you cannot make assumptions about anyone.
I have met white men you will gladly pay you what you want, and black women who want to know why they must pay for a $12 flood map cert. I have worked with Asians who haggled you to death, but once they agree upon a price refer you to a dozen of their friends and relatives. I have met Hispanic women who pay the rate without asking anything and those who don't pay yet ask everything. It all depends on the individual, and no two people are the same.
Anita Hill can talk about the statistics, but she can't answer the big question: WHY do minorities, especially immigrants, seem to accept subprime loans? After all, many of these people come from cultures where everything is negotiable, from the price of a mango to the length of a jail term. Yet she somehow thinks these people meekly sit back and are browbeaten by the loan man, who increasingly is also a minority like them? She wouldn't like the answers you get more often than not. Many of these people have cash incomes they don't report. Some don't have jobs they can verify. Many of them have bad credit, collections and unpaid utility bills. Many talk their friends or relatives into cosigning their house when they have bad credit. And, here in the Boston area, they almost invariably buy 2- and 3- family houses with no money down, which are ALWAYS high risk to lenders--as you can see by the current wave of foreclosures. In other words, many of these people take these loans because they know they can't go to Bank of America. The sad thing is, most of these people have no desire to change how they do things to allow me to write them a safe government loan--it's much easier to not pay taxes and mismanage their credit.