History Repeats

One of the worst jobs I ever had was working as a temp, processing home-purchase loans at Bank of Generica. I had absolutely no background in real estate but I did possess a working knowledge of basic arithmetic and things often just didn't add up.

I would input the applicant's financial info into the system and it would often 'auto-reject' the loan for reasons of insufficient revenue - these rejections were turned over to another group and never seen by me again. I assumed that a household with a combined income of under $30k would be discouraged from taking out a 20-year mortgage on a $450,000 home.

I was wrong.

Weeks later, during a second stint at BoG, I was assigned to the group that got the rejects, as well as hundreds of thousands of new applicants- the program was called something very much like "Purchaser Rewards" and was purportedly designed to give low-income applicants a chance at buying a home by waiving the closing costs, adding bonuses and offering really low short term interest rates (subject to change after x years)...I was stunned by some of the loans that were given- it was clear that a great many of these people would never be able to pay-off their loans and that the Bank would inevitably foreclose and repossess the home, starting the cycle all over again.
I even approached a supervisor who I thought was somewhat cool and asked him if my suspicions were right- were these people being set up to lose their homes? It seemed unethical to me.

The next day I was transferred to a new dept. for training and subsequently became deathly ill- booze almost killed me and my week in intensive care sort of pushed aside my thoughts about BoG and it's questionable lending practices.

Until I read numerous articles like this:

More than 2 million hybrid adjustable rate mortgages (ARMs) come up for reset this fall - peaking in October with more than $50 billion due.

Borrowers who took out hybrid ARMs in 2004 and 2005 to secure low "teaser" rates for the first two or three years of the loan may see their monthly mortgage payments climb by 35 percent or more.

The company predicts that 2.5 million first mortgages will default this year, with little chance for improvement soon - Economy.com expects delinquencies to peak in the summer of 2008 at 3.6 percent of all outstanding mortgage debt, up from 2.9 percent during the first three months of 2007.

The worst-hit loan category will be subprime adjustable-rate mortgages (ARMs). Economy.com expects foreclosures for those loans to hit 10 percent of that group by mid-2008. The foreclosure rate for that group is currently 4 percent and was as low as 2.5 percent in 2005.

2.5 million defaults could potentially mean 2.5 million newly homeless families- in just a year! The low-wage borrowers who could just barely keep up under the temporary 'teaser' rates are now finding it impossible to make the new, increased payments and are losing their homes at an alarming rate -from 10% to 50% depending on the source- in any case, it's a sure sign that the housing 'bubble' is now as deflated and distasteful as a used condom.

The worst thing is, this was planned. The Banks knew they'd be foreclosing- they just hadn't planned on this volume of failures- their plan worked a little too well. With a great many homes getting ready to be put back on the market during a short time, it's inevitable that property values will drop, possibly below the appraisal value given at the time of the now-defaulted loans.

It's possible that the lenders will not be able to recoup their funds, and when Banks go broke, people suffer. There is some precedent in American history for exactly what is happening today- these could be the final days of the end of a modern Gilded Age. The hedge funds that were based on this speculative cycle of easy credit and quick home turnovers are in danger of being exposed as the emperor's clothes and investors are getting sweaty. The market could sink faster than a Teamster in the Hudson- or it may not.

If the statistics quoted above hold true we are in for some long-term "market correction"...and that may mean a return to the days of breadlines...except I have a difficult time imagining the current government having the desire or ability to help the millions of first-time home-losers that seem to be the inevitable by-product of these subprime lending practices. I've not seen any stats to back this up, but my own experience showed me that a great many of these teaser loans were given to working-class minorities and new immigrants- people whose hopes probably outweighed their resources when they took out the mortgages...now they may have no home - and without a home, how much hope is there?

Economists that I have read tend to give conflicting reports, so I am not sure if it's time to panic or not, but this current situation was easily predictable and it just seems to me like another in a seemingly endless series of moves by corporations and government to increase immediate, short-term financial numbers without taking a serious, considered look at the long-term results. I was an untrained office temp with a grade school education and I was able to predict that this subprime lending would soon bite everyone involved in their collective ass- if I could see it coming, you can be certain the stuffed shirts saw it too- the difference being that I do care,but I have no power, and the Banks don't care and they have all the power.

I feel terrible for the millions of people who are losing their homes and I hope that the entire market doesn't collapse soon...yeah, I know, I know- the end is always nigh, right?

It's just that sometimes it seems a lot nigher than it needs to be.

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In other job-search news:

- My local paper recently switched to the Yahoo-based 'hotjobs'. I must first disclose that I despise Yahoo...my first email was a Yahoo account and I would get hundreds of spam letters a day- something I don't get with other services- and I once made the mistake of running the Yahoo Anti-Spy program on my computer- the Yahoo program actually infected my PC with malware that I had to use Avast and Ad-aware to track down and clean...anyway, hotjobs is horrifically rife with BS "work-at-home" 1-800 numbers scams- the kind where you pay a registration fee before you get the details ...I called one that was looking for A/V technicians and was told that I had to pay a $45 dollar fee and register as a 'movie extra/model ' before I could apply for the Tech jobs.
This sent my Spidey-sense to tingling. I told the phone rep that I wanted to research the company before investing $45 in it:

"Research? What do you mean? We are right here in San Francisco... (so what, I thought, I live in VA) ...all the info is on our website and I can answer any questions..."

"I'd like to run your company through a Lexis/Nexis search (a bluff, now that I am not working in a law firm) and consult the Better Business Bureau, among other things..." (like googling blogs)

The phone rep was verbally squirming. "Please, there is no need to research us- we have been in business for nearly four years and are in good standing with everyone, including all the major studios and networks...we are a member of the BBB too..."

"OK. I'll get back to you after I check that out."

Guess what? He lied.

According to the BBB, the company in question (San Francisco- based Talent 6) is not only NOT a member of the BBB, but they have also an "unsatisfactory record" due to unresolved complaints against them.
Then I found this blog. It seemed to confirm my suspicions- there's a lot of ID switching in the comments, but there's plenty of anecdotal info against the company and the only defense is offered by the CEO himself, who calls the blogger a "nigger" , "dyke" and a "whore" , among other things. Later he apologizes in a truly-half-assed way, but by that time the blogger had apparently initiated legal action - it's a confusing story, but it steered me away from Talent 6.

- Hotjobs also offers openings that are listed under categories such as "administrative" or "technician" , but when you click on the link you are taken to a Military recruitment site- yeah, I'd like a job in communications technology that offers training and a chance for advancement, but not by exposing myself to combat. My instincts tell me that now would be an unwise time to enlist in the military...

- I am in love with my home fax/copier/scanner. It's the best job-hunting tool ever made- I can scan documents, fax in my resumes to places that don't accept emails and easily print out all my unemployment searches - the great Commonwealth of VA has decided that I can exist on 200 bucks a week until I find a new job- I'm thrifty, but not that thrifty- but at least it extends my 'cushion' a bit. I just have to prove that I have applied to at least three jobs per week.
I applied for three before my first cup of coffee...very easy.

Now why isn't my phone ringing?