Monday, May 07, 2007

Subprime Update: The Other Sorry Anecdote

by Tanta on 5/07/2007 07:32:00 AM

As it is not possible these days to pick up a paper--any paper, it seems--without reading yet another sorry anecdote about some sorry subprime borrower who never should have gotten a mortgage in the first place, I must say I'm refreshed by Lynda V. Mapes' approach in The Seattle Times ("Borrower Beware"). Here, we get the other side of the anecdote, the sorry story of some sorry broker who put this sorry deal together.

Mills specializes in clients like Fultz and Swartz. At it for 17 years, she caters to people with bad credit, low incomes and no savings.

"Hey, babe, it's Kathy, " Mills said on a recent workday, dialing up one of the dozens of lenders she says she works with regularly to hook her clients up with a loan. Mills is adamant that she explained the terms of the deal to Fultz and Swartz, just as with her other clients.

"We do this with all varieties of people, all nationalities, every brain level," Mills said. If anything, she remembered the lengths she went to, talking the couple through the deal. "They were very high maintenance," said Mills, swiveling in her leopard-print office chair.

She sees herself as serving a real need for borrowers struggling month to month with their bills, who want a home of their own, just like everyone else.

"I feel sorry for anyone who can't get into a house," Mills said. "We beg the banks to give us their turn downs. I help people; that's the bottom line."

And as for those borrowers?
Reviewing documents Fultz and Swartz provided, Huelsman concluded the couple's credit scores should have qualified them for a better loan, with a lower interest rate, especially on their second mortgage. She also found it odd that several different applications for the loan reported varying income levels, even on documents faxed the same day.

Asked about that, Mills said, "We only write down what the borrower tells us." For his part, Fultz said he never reviewed his final loan documents or looked to see what Mills wrote down.

Huelsman said she found some of the documents incomplete and confusing.

Based on what she knew so far, Huelsman said, "I don't think there is any way in the world they could have understood what they were getting into."

Asked about the forms Huelsman questioned, Mills said, "I agree, it isn't explaining it in full." But Mills said she makes up for that as she talks to borrowers: "It's explained to the client 47,000 freaking times."

Broker sounds a little on edge, doesn't she?
The pullback has cratered the business model for brokers like Mills. She used to write 10 to 15 loans a month. In March, she wrote two. In February? None.

"I didn't make my own mortgage payment this month," Mills said in April. "But nobody feels sorry for me."

Nor does she feel sorry for Fultz and Swartz, Mills said.

"We didn't do anything wrong," Mills said of her firm. "She quit her job and now they can't make their payments. Well, I didn't make mine this month, either. How do you help someone like that? I wish I could help myself."

Perhaps the next time we are dragged into some pointless "debate" about subprime that degenerates into "We're helping the poor!" "Are not!" Are too!", we could remember this one. If we have to make social and economic policy based on sorry stories and anecdotes, let's get all the sorry stories and anecdotes out on the table.