A tale of a debt binge, told by a man who knew better
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Plenty of post-mortems on the mortgage debt debacle have focused on people who claim they didn’t know what they were getting into.
Now one of the country’s top economics writers explains how even otherwise intelligent people went deep into the hole. The kicker: He writes from personal experience.
The New York Times’ Edmund L. Andrews, who covers the Federal Reserve for the paper, bares his personal debt catastrophe in a new book, ‘Busted: Life Inside the Great Mortgage Meltdown.’
From a lengthy excerpt published in the Times:
In 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others -- borrowers, lenders and the Wall Street dealmakers behind them -- I just thought I could beat the odds.
Looking to buy a house in suburban Washington, D.C., with his second wife, Andrews was stunned to find out that they could qualify for a $500,000 mortgage, despite their modest take-home pay after Andrews’ monthly alimony payments.
What they got was a ‘liar’s loan’ -- a mortgage based on whatever Andrews wanted to tell the lender, which wasn’t much.
Andrews writes:
As I walked out of the settlement office with my loan papers, I couldn’t shake the sense of having just done something bad . . . but also kind of cool. I had just come up with almost a half-million dollars, and I had barely lifted a finger. It had been so easy and fast. Almost fun. I couldn’t help feeling like a high roller, a sophisticated player who could lay his hands on big money at a moment’s notice. Despite my nagging anxiety about the gamble that Patty and I were taking, I had whipped through the pile of loan documents in less than 45 minutes.
The story just gets better from there. I won’t give away the ending.
Go here for the full excerpt.
-- Tom Petruno