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The information about Patty Barreiro's bankruptcy filings should have been mentioned, but it seems to me that the lack of this info is being used in a way that is designed to obscure/discredit the larger point. And what is that point? It is simply that at the height of the housing bubble, brokers/lenders were more than happy to cast underwriting standards aside and make loans that -- absent a continuing inflation of the bubble which would allow for serial refinances -- buyers could never reasonably expect to be able to repay.
Was Patty Barreiro someone who liked to spend money on things beyond her actual means? It seems clear that she was, and that there was a good deal of friction (disclosed by Andrew Edmund) over this issue. But suppose Patty Barreiro never spent a single cent at J Crew, or that Andrew Edmund had disconnected his home cable/internet/phone service. Would they then have been able to pay their mortgage, put food on the table, keep the lights on and pay their water bill, property taxes and meet other basic needs? I can't see how. Regardless of Patty Barreiro's habits, the question of getting into trouble with the mortgage they were allowed to take out when they never should have been able to qualify in the first place was a question not of "if" but "when". And that's the bottom line. As I said above, the only way this was going to work was if the value of real estate continued its climb and Edmund/Barreiro and untold thousands of others had been able to serially refinance at favorable rates, drawing money out of their ATM/house each time.
We had mortgage products that never should have been offered. Low doc. No doc. Stated income. As long as your FICO score was above 640 (which is a low score really), you were golden. Fog a mirror? Get a loan!
Don't let the Patty Barreiro bankruptcy issue obscure the larger point. We had a toxic culture of debt and it was the poison that allowed many families to live a lifestyle beyond their means. This toxic culture of debt is what was used by both financial interests and the government to mask the fact that the expenses of living have far outpaced the wages and salaries of the vast majority. And this toxic culture of debt is the status quo that our government (through the bailout of banks and Wall Street) is pushing us to return to.
It was a mess. It is a mess. Don't get distracted from that point.
