As renters, my husband and I have been a little unclear on what all the hubbub is with the mortgage crisis. The other day, we saw a headline on the paper that said, “Crisis seeps into prime mortgages”…I took that to mean even people with 30-year fixed mortgages at reasonable interest rates were defaulting on their loans. Is this accurate? I don’t know, but my husband believed me :)
Our landlord owns a few other properties. One of them went vacant and he cleaned it and listed it on Craigslist on a Friday. He was telling me that he had 60 people show up to see it that Saturday. He spoke of how he felt terrible for the people because many of them were in foreclosure situations and desperate for an affordable place to live.
My husband and I were talking about how it must be difficult for a landlord to be in that position – do you rent your property to someone who has shown credit-unworthiness? Even if it was in unfair circumstances?
Well, the question of credit-unworthiness is really the clincher, isn’t it? Are the 4 MILLION Americans who are at risk of losing their homes all somehow delinquent or poor money managers. Surely not. But, as someone who has no first hand knowledge of the home-buying process, I made quite a few assumptions. Most of them based on television.
For example, I remember an episode of The Ellen Degeneres Show (her sitcom, not her talk show) where she was trying to buy a house. The prospective lender made her account for every late payment she had ever made in her whole life. It was a very serious and elaborate vetting. Basically, I assumed everyone that has a house went through a similar seemingly-painful and very thorough examination before they were granted a mortgage.
Then I learned about NINA loans. NINA stands for No Income, No Asset – meaning the hopeful homebuyer did not have to state any income or any asset, and could be approved for a mortgage. Regardless of employment status or past credit history!!! Who would do such a thing? Thousands of mortgage brokers across the country.
Here is a very enlightening podcast – every one should listen to it. This week’s This American Life podcast follows the trail of mortgages from homeowner to global money pool. Listen and learn. I love This American Life. If you don’t have any desire to listen to it on the computer, you can download it for free on iTunes, but get it now, because free TAL podcasts disappear after a week. You can purchase them later, but they’re only free for their week of publication.
Other 2008 TAL programs I highly recommend: