The Washington Post
I watched a middle-aged widow lose her home recently.
Her story was familiar. She owned her simple brick residence outright until four years ago, when a mortgage broker stopped by and offered her a loan too good to be true. In exchange for taking on a modest monthly payment, she could make some needed repairs and consolidate other debts.
More sophisticated than many borrowers, she realized she was getting an adjustable-rate mortgage. What she didn't realize was that, in the biggest "bait-and-switch" ever pulled by an entire industry, her ARM was not tied to the prime rate or any other index, as adjustable-rate mortgages have traditionally been. Her rate simply adjusted periodically, ever upward. When it hit 14 percent, her social worker's salary could no longer cover the payments.
I watched this story unfold in court, from my seat in a bankruptcy judge's chair. While a Chapter 13 filing temporarily stopped the foreclosure on this woman's home, it did little more than buy a few months' time.
Filed under: Economy
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