October 17th, 2008
05:55 PM ET

He gave me an easy mortgage. And now look.

Ismael Estrada
AC360° Producer

The minute my wife and I walked in we knew the home was for us. It was perfect! There was plenty of room for our new baby, a huge back yard, a fantastic kitchen and tons of charm. This was just right. But there was a giant problem.

We didn’t have nearly enough money for a down payment and we already had a mortgage on our condo we were renting out and taking a loss on.

Our mortgage broker said our credit was outstanding and we could get a 100 percent loan, not a problem. I remember thinking, this guy is nuts! This is not supposed to be this easy, and can I really afford it?

We got caught up in the moment and bought the house.

This is the scenario that was played out over and over again all around the country. People getting into loans they probably shouldn’t have qualified for.

We were lucky: one year after we bought our house, I took a job out of state and we sold our home for a small profit.

But a few years later, the bottom fell out of the market and the values plummeted. People are now stuck with those crazy 100 percent loans or adjustable rate mortgages (ARMS) that now have them paying out the nose on a loan they shouldn’t have been able to sign in the first place.

Why were banks handing out money so easily? How were all these loans getting approved? Tonight, on AC360, we’ll tell you the story about the man who had originated a great many of these loans, and why he is one of the culprits of the collapse.

soundoff (33 Responses)
  1. Philip Moubray

    Anderson, can you please interview Robert Burner and Brian Grow of BusinessWeek? They just wrote an eye-opening article "They Warned Us About the Mortgage Crisis". There are heroes and villains here going back 6 years! Your viewers would love it.

    October 17, 2008 at 10:32 pm |
  2. Jenny

    People who took the mortage had no responsibility? You knew the money you couldn't afford, you still went on?

    October 17, 2008 at 10:16 pm |
  3. ebrima

    Anderson.....I am waiting to see George Bush and John McCain on the the list of 10 most wanted.

    October 17, 2008 at 10:14 pm |
  4. Lloyd - NJ

    I propose a requirement to take classes and pass a test to earn a license to commit to a mortgage. This would insure that the buyers of the future understand their options and risks. Like driving a car, one must be educated in the skill required to make important decisions. We can begin by teaching high schoolers how to balance their check books or how to use Quickbooks...

    October 17, 2008 at 9:54 pm |
  5. Renee

    Me and my husband went years raised our two older boys (who now 21 and19) all we ever wanted was our own house. My husband worked 60 hours a week and he is right in middle class ( truck driver) We got our credit straight and we went out looking for our house. We found a house ( not our dream house ) but the realtor gave us the dance and song about the house .. We got our loan and we knew that we had a adjustable rate but we was told and in the paper work it said it would go up one or two percent. After we got the home and all the paperwork was done we ended up paying 11% which made our payments 1000 a month. That was okay we could afford that and plus the morgage lender told us heck after a year you can refinance out of this loan. 2 years later our 11% interest jumped up too 17% and our payments went up to 1700 a month... oh btw there was no refinance out of that loan cause our score was not high enough.. I dont expect the gov to get us out of trouble. But sure makes me upset when they are bailing out these people who put people like us in positions we are in. My thought if they gave the banks that money , then why not help the little guys that the banks and morgage companies put all the people in this problem.. I pay my taxes, I can spend my taxes to help bailout wall street and the banks but cant use all the taxes I paid to bailout myself .

    October 17, 2008 at 9:47 pm |
  6. Diane - Naperville

    When I was 18 years old, I got my first credit card. The first month I received a bill, I paid the minimum amount. The next month when I saw how much the finance charge was, I paid the card off. Since then, I have always paid my credit cards off each month. The first house I purchased was actually less than the maximum that the bank would approve. It's called living within one's means. Too bad more people don't live this way. I in no way felt deprived, except for the past few weeks, when I saw my investments lose their value.

    October 17, 2008 at 9:44 pm |
  7. Rose

    It doesn't make a difference that "poor, silly people" paid too much for houses with "too easy to be had" credit. They're just pawns in the game.

    They are just someone to blame, while the real "criminals" get away with it, all at taxpayer expense.

    Every house could be payed for at full price by the government, and the banks would still be in trouble, from my understanding. Credit default "swaps" were unregulated, and many times the worth of the mortgages. Like the Dutch tulip mania of the 1600's.

    What it amounts to is: we're screwed.

    October 17, 2008 at 9:09 pm |
  8. Lisa/St Paul,MN

    This seemed to have happened to a lot of people. My question is what ever happened to the starter home? Buy small and work your way to your dream home. If you can't have it now, save and sacrifice and you will get it later.

    October 17, 2008 at 8:58 pm |
  9. mark hoffman, Phoenix AZ.

    And P.S. Scott, do what I did and move away from Cali. Lots of cheaper places in the flyover states!

    October 17, 2008 at 8:53 pm |
  10. Heather,ca

    I am not blaming the home buyer. I am saying that it is your responsibility to do all the research so when its time you know what you can afford and you know the type of loan you should have. You cant assume that the person who processes your loan is there to do whats in your best interest. So many people dont do the research. They go into the process assuming that the person doesnt have other motives. These subprime arm mortgages are a big part of the ponzi scam. Almost every family starts out in an apartment and saves the money and does the research and then one day they have enough for a down payment on a home. I know its hard to be patient when you see houses being built in bulk.But you have to either wait it out or move to a more affordable place. Good selfless people make sacrifices all the time. Because they know nothing good comes easy, its always been through hard work.

    October 17, 2008 at 8:51 pm |
  11. mark hoffman, Phoenix AZ.

    I only put 3% down on my house and had to take an ARM starting at 6.00% for a mortgage. Bottom line: it was the best thing that ever happened to me! The problem is many people agreed to either a ridiculously high rate increase later on or a crippling balloon payment down the road. I simply told my lender that my ARM had to be tied to the Feds mortgage rate and could not go up more than 1 percent a year. I also told him that the ARM had to be flexible so that it could actually go down if the Fed rate did. He agreed because he wanted the sale so bad. Greed makes people to stupid things. Instead of being led around by the nose by these crooks, people should just have told their mortgage person these are my terms – take them or leave them!

    October 17, 2008 at 8:48 pm |
  12. Ya Ya

    Everyone got greedy,
    From Congress (whom some had favorable deals), to the executives on wall street (whom got paid, the more people bought loans, the bigger their packages), the brokers (who lured , conived and was able to convinced with their scrupulous ways because the more buyers, the more and higher their commission), and then to the buyers...if you took out a subprime loan, then the list above was involved in this mess....
    We need o find out how to prevent this from happening again instead dwelling on what has happened. Let's PREVENT this from happening again rather than letting it happen and CURING... (PREVENTION IS BETTER THAN CURING)

    October 17, 2008 at 8:31 pm |
  13. Kathy

    It's horrible how people dealing in mortgages took advantage of people. Some people knew that they didn't qualify, and willingly went along with the program. I worked for a dishonest broker in California in the late 80's who even faked tax returns. But the borrowers had their eyes open.
    The thing about you adding the builder/broker as one of the 10 who were at the base of the problem is ok...but there were people in congress who pushed the sub prime, no qual. loans. People that came before the dishonest broker. Chuck Shumer, Chris Dodd, Barney Frank & other democrats fought for sub prime loans & fought against putting regulations & restrictions in place. You did not mention Greenspan DID recommend in one of his boring speals to put restrictions on Fannie & Freddie. Why?
    What about the groups like Acorn, who were taught by people like Obama, who went into banks & clearly strongarmed them into makeing loans. You have four more people to go in your top 10. Will you be honest in your report? Or is this another way of trying to use your position to create revisionist history?

    October 17, 2008 at 8:16 pm |
  14. Sarah

    I live in Atlanta where the median price for homes is around $200K. For the past few years, I've seen many new developments where the starting prices were $600K – 800K. I was very surprised by how quickly these homes were sold; some were sold even before construction was completed. Sadly, a few of these homes are now in foreclosure. I'd hate to be unsympathetic but if you know your lender is "playing with the numbers" to make you qualified for a loan there's a good chance you actually can't afford the house you're trying to buy. It's called common sense. I live in a modest house and it's not because I enjoy the creaky floors and tiny bedrooms.

    October 17, 2008 at 8:11 pm |
  15. Lisa

    Quote: "I remember thinking, this guy is nuts!" "Why were banks handing out money so easily?" Unquote

    Oh, come on! When are you going to accept your part of the blame for all this?

    Why did you do something that at the core of your being you knew wasn't right?

    Borrowers were told they qualified for $300,000 house but they would come back and say "I just didn't like things in that price range..." and buy something at $450,000 because they thought they were entitled to live in THAT house. Loan officers would be forced to secure financing or else the realtors would be raising hell & threatening to find another loan officer.

    Look, we saved our money for a down payment and rented until we had it. After buying, we never incurred more debt or used our home as an ATM. We didn't buy the biggest, baddest trucks or RV's and ATV's like all our neighbors did. Our cars are paid for, our house payment is low and we are doing just fine, thank you.

    Greed, my friends, you knew you shouldn't do it but you did it anyway. I'm sorry but I just think that it is a hard lesson but one that people needed to learn. Maybe next time they'll be more prudent.

    October 17, 2008 at 8:00 pm |
  16. Emma

    I don't want to mean but I feel like these people should also take some of the blame. Just because a mortgage broker tells you something is true doesn't mean you should believe him. Being "caught in the moment" is not an excuse. I'm sure it's nice to live in a big house. However, if you're not sure you can afford it, you shoudn't buy the house....regardless of what someone tells you. Yes, we should blame the mortgage companies; however, people living outside their means should bare some of the responsibility as well.

    October 17, 2008 at 7:58 pm |
  17. Sunil

    My wife and I have not taken a vacation in years, eat out at every opportunity or on any excuse, shopped for bargains whereever possible, did not buy any luxury items or cars, I held two jobs for years, inspite having a good management position and my wife worked at ordinary jobs while attending school for her master's level degree, Not because we were cheap tight wads but because we had two kids to put thru college and a mortgage to pay. We never had a credit card balance and did not collect credit cards like a deck of cards. We are responsible folks who want to live our Amrican dream at our own cost and efforts and hard work.

    I hope you will put the greedy, irresponsible, ignorant Americans who are as responsible for the economic mess as the banks and wall street, on the "wall of Culprits for the collapse" . I am now being forced to bail out these low lifes of society with my tax money. I find this reprehensible and totally outrageous.

    October 17, 2008 at 7:50 pm |
  18. Greg

    Scott- Buyers are to blame if they bought more house than they can afford. If they make $90,000 a year than they need a $90,000 a year house. The cost of Housing affects everyone. When we purchased our home we were making close to $90,000 and we bought one we could afford. I would have loved to live in a better place or area but it was not possible. Actually, it probably was but know we would have some major problems if we bought more house than we could.

    October 17, 2008 at 7:42 pm |
  19. Larry

    And the Mortgage broker was?

    October 17, 2008 at 7:36 pm |
  20. GF, Los Angeles

    @ Scott plain and simple if you can't afford a house – don't buy it. Maybe you should've thought about the ramifications of having kids before you had them? The assumption that you or anyone else has the right to own a home when you can't afford it is ludicrous. I know the housing prices out here have been over half a million dollars which is why I don't own a house because I can't afford it. Based on what I make – the maximum I can spend on a house is $170,000 provided I have 20% down. There is no way I'll ever find a house for $170,000 so my choice is to remain a renter or move somewhere else where the housing isn't so expensive.

    October 17, 2008 at 7:31 pm |
  21. Sharon, LA, CA

    I guess I just don't get it. The concept of "the American dream – of owning a home" doesn't make it anymore logical to get into a financial arangement that does not fit ones means. Things are a trade-off. If you want a home, then maybe you should wait to have children until you've saved enough to buy a home. I do feel for all of the people now in trouble – but simple math should have helped. I'd love to have a home – but I choose to live at the beach – and I know I cannot have both. I'm sorry – but given that I'm now expected to pay nore taxes so others can have what they want while I still cannot – it just doesn't make too much sense to me.

    October 17, 2008 at 7:26 pm |
  22. Sandra

    Scott – You save until you can afford it or buy what you can afford. If you have to start in a mobile home, you do! We have all been there. It takes an average of 3 moves to move up. To this day I couldn't afford to live on the Coast in California......so I don't!

    October 17, 2008 at 7:20 pm |
  23. lampe

    Maybe you should have looked for a larger apartment, before by a home, that you knew you could not afford.

    October 17, 2008 at 7:19 pm |
  24. GF, Los Angeles

    Just because you were offered a loan to buy this perfect house that you knew deep down you could not pay off it's the loan officer's fault? They are obligated to explain to you what you'll pay each month before and after the interest rates resets. If they did not, it's your responsibility to get the answer. I'm tired of this whole I didn't know business. Taking out a loan of any amount is your responsibility to know (learn) the terms of payment before you sign on the dotted line.

    October 17, 2008 at 7:19 pm |
  25. David Miller

    There are millions of families who have been responsible in their use of credit, and are not upside down on their obligations. Although I've heard no mention of it, it seems pretty obvious that those who sought to live within their means are now being penalized, through the taxing mechanism and are being forced to subsidize the irresponsible ones.

    There are many things that are egregious about the financial state of the United States, and all should be addressed. This should be one of them and it should get the attention it deserves.

    October 17, 2008 at 7:16 pm |
  26. Sandra

    When are people going to take responsibility for their own actions? Everyone keeps blaming greedy wall street. People were handed the opportunity to own a home. It is up to these same people to purchase a home with payments they can afford. Nobody made them buy it. Doesn't matter if the housing prices are down, if you stay in your house and make payments, in time the market will come back, it always does. I have been through that and we had to ride it out (early 90's) nobody bailed us out. Now the rest of us responsible people are stuck bailing out those who couldn't handle it. Next time READ what you're signing!

    October 17, 2008 at 7:15 pm |
  27. JC-Los Angeles

    What goes up must come down; how soon so many forgot one of life's simple lessons.

    Hard work is just that; today no one wants to work tirelessly and ethically in hope of a brighter tomorrow; they want it all now.

    Unfortunately, as evidenced by the need for $700 billlion, there are ample worthless and fraudulent individuals who are readily available to assist with today's dreams.

    Willy Wonka showed us what rotten looked liked, I just had no idea those children would all reappear later in life as heads of industry and government.

    October 17, 2008 at 7:09 pm |
  28. Scott

    I'm a little tired of the people blaming buyers who "bought more house than they could afford." Palin even said people shouldn't buy a $300,000 house when all they can afford is a $100,000 house.

    In lots of places today, straightforward 3-bedroom suburban starter homes an hour away from people's workplaces cost $500,000 and up. In 2007, the median home price in California was $587,560. So what do you do if you have a toddler, another baby on the way, a good job paying $90,000, a tiny apartment on a busy street with no place for kids to play, and a lender who says there's a way to get you into a decent 3-2 by playing with the numbers? On the coasts, there was no other way to achieve the American dream - not an exorbitant dream, just the base model.

    October 17, 2008 at 7:07 pm |
  29. Adam Kantor

    We had to fight tooth and nail to get our mortgage on our inexpensive townhouse. Luckily we got it after about a week. I guess those are the joys of living in Canada, no easy money here, and a more secure system.

    October 17, 2008 at 6:59 pm |
  30. Heather,ca

    Having bought my house the old fashioned way where you have money already saved for the 25% down and then look for a house that is priced so you have the right amount for the down payment, that old saying is always true. If it seems to good to be true it most likely is. How about you can't get something for nothing. They always say buying a house is the most important financial decision you make in your life. I remember my husband spent evenings reading every line of print of every page in the stack of loan documents that we were given. If he had a question he either talked to a relative or went online. There is no such thing as free. The worst part of not reading what you sign is that when you cant afford it and the house is forclosed the neighboring homes automatically go down in value, the property taxes that the schools would get are gone and with this ponzi scam we the people are paying it for it with our tax dollars. You cant get something for nothing. Its one thing to sell a house its another to put a proper legal loan together. You have to read the loan documents, you have to read everything in life.

    October 17, 2008 at 6:45 pm |
  31. Lilibeth

    Bottom line is, if it sounds too good to be true, it probably is.

    Edmonds, Washington

    October 17, 2008 at 6:25 pm |
  32. Cindy

    On one hand I feel bad for these people that got sucked in on these crazy loans but on the other I don't. Deep down they knew that they couldn't afford these houses. Yet they didn't listen to their gut but chose to go on with the deal. Now they are stuck with a house that they can't pay for that has lost it's value and now have the possibility of being homeless. All because they wanted to live beyond their means. It's their own fault. No one can force you to sign on the line for a house. No matter what they promise it is up to you to make the right move. They didn't.


    October 17, 2008 at 6:15 pm |
  33. Henry Petit

    You "got caught up in the moment and bought the house" ? Do you not stop and read the contract for a multi-hundred thousand purchase? Buyer beware, the purchase of a home is a life altering financial decision. It is called common sense, if you cannot afford the house then you will fall behind on your payments and be foreclosed. Thank you have a nice life.

    October 17, 2008 at 6:08 pm |