A few years back, I was living in Pennsylvania, working at a community college and in the process of buying my first house. The offer process was irritating as hell, the owner wanted to raise the purchase price and pay my closing costs and do a number of shifting balances of things, and I was refusing, and people were getting irritated with me.
Then came the mortgage brokers.
The first one arrived, late, and pulled out a wad of papers, including a credit report. He started by shaking his head.
“Ok, you have some late cell phone bills. I can help you, but we have to clear these things up.”
He leaned back in the chair and folded his hands in front of his face and stared at me.
“I don’t have a cell phone.”
He ignored me and kept talking. He set up his “best plan” and then his “second best plan”. The first was an adjustable rate mortgage (so my payments would be so low, he said, 200 dollars a month!) with a second mortgage for ten grand with some cash back feature “for all the repairs you’ll obviously need.”
The second plan was also and ARM with a second mortgage but this one was zero down! I’d pay a little more in the long run, but probably not, that’s so far down the line he was sure, he said, I wouldn’t be living in a ‘starter home’ at that point. I could do this tomorrow! Please just sign here! He handed me a pen and I refused.
I got the guy out of my house and called my brother Frank.
“Classic sub-prime lending,” he told me.
“Frank, it’s like charging part of the loan on a credit card. That’s insane,” I told him.
“Well, understandable,” he said. But then he added, “For comparison’s sake, though, interest rates in the 1980’s were higher.”
I was determined not to be sub-primed into eternity. The seller was getting irritated, the realtor told me. She wanted my loans to be done. I just needed to get on with this. I could be sued. I needed to find a mortgage.
The next loan guy pulled up to my apartment in a shiny silver VW Bug and brought in his fancy satchel; we sat down at my kitchen table. He set up a pile of papers and pulled out his orange calculator and set it on the table. I pulled out my trusty TI-83 plus graphing calculator and set it on the table with a thud. He laughed. “What is that?” he said.
“Scientific calculator,” I replied.
He started tapping on the calculator. He proudly showed me the number on the screen: 201.40.
“That can be your payment!”
I asked him to show me how he arrived at such a number.
“Why wouldn’t you want to pay 200 dollars a month for a home? You pay so much more now for this… this small apartment.”
“Because in five years I’d be paying over a thousand a month and I don’t want that.”
He replied quickly, “But who is to say where you’ll be in five years? Certainly you’ll be in a better job, making more money! Then you can just sell your house and buy and even better house and guess what? Pay 200 dollars a month for that one! And that one might have a pool! And be fancier!”
I showed him the door.
I’m not in this crisis they are voting on now and and am not sure how I feel about it. Thoughts?
Jack Silbert, curator