I sold a house 1/2 years ago right when the market was starting to soften and look scary. My husband wanted to wait and I forced the issue (yes, Dear, you owe me an apology for all the arguments we had back then) and we were able to get a good price for our townhouse and move into a larger single family home with a great yard for our family of seven. The market crashed soon after and now houses on our old block are selling for $100,000 less than what we were able to sell for.
When we were getting the new mortgage, the broker our agent recommended was pushing us hard to get a variable rate loan of the variety that is considered one of the main reasons things have gotten so bad. Pushed it to the point of the ridiculous since we had a good credit score, a big down payment and qualified for a good 30 year, fixed rate mortgage. I had studied these loans for the better part of a year before we sold and knew they were wrong for us, in fact they were a dangerous risk to middle class folks without fluid reserves in savings/investments. These loans were originally designed for people with considerable wealth. I finally had to tell him that if he said variable rate or interest-only one more time I would leave the office and find a new lender. He gave up.
But our buyers, our poor buyers! They were a nice immigrant couple with two toddlers. They had limited English skills and very blue collar lower on the wage scale jobs. Their real estate agent spoke Spanish/read the documents and guided them through the whole process. Guided them into two loans with variable rates (one of those 80/20 deals that were so popular not long ago). I went back to the old neighborhood this week to show off the new baby to a friend and the house had no curtains, none of the flower pots I had kept filled on the porch, and a giant bank's padlock on the doorknob. My friend told me that they had lost the house to foreclosure four months ago. This hardworking family probably got the same high pressure sales tactics I did from a lender who was getting kickbacks for encouraging them to take a risk they had no reserves to handle if the market went bad. Being first time homebuyers with a language barrier on top of it, I consider them to have truly been taken in by "predatory lending".
I know it sounds silly, but I had enjoyed picturing this nice young couple in my beautiful, lovingly cared for townhouse where my third child was born (literally born in the living room). Now I am worried and sleepless tonight worrying about what happened to them and angry that our government has bailed out Wall Street while leaving this couple home-less and help-less. And angry that the "free market" is free to beat up hard working Americans, but the free market business types can yell for help whenever they screw up and receive it without question. Regardless of what Joe Scarborough says, the housing crisis is not made up of reckless speculators buying up Florida condos as investment properties. Its made up of a Starbucks barista and a construction worker with a two year old and a three year old who were so excited to be getting their very own bedrooms --for what turned out to be 14 months.