The Foreclosure of America

Wednesday, January 14, 2009

Hear an insider's story of how the current mortgage crisis got started. Also: can we prevent an economic mess like the one we're experiencing now from ever happening again? Adam Michaelson is author of The Foreclosure of America.


Adam Michaelson

Comments [29]

mozo from nyc

As a former residential real estate appraiser, I can tell you that the group that deserves the least amount of blame for this mess is the consumer. These mortgage products amounted to financial crack for many people who saw this as the only opportunity to own a home. Over 100 different products were created in the past eight years. One lender actually had a product with a LTV (loan to value) ratio of 105%. There's only 100% of anything, folks. These borrowers that signed on these bad products were for the most part unaware of the possible down side to these loans. Some, admittedly, were greedy just like all the other players in this story.

Jan. 14 2009 05:23 PM
John from NYC

Gah. The more I think about this the angrier I get. I know a lot of people have gotten really screwed, and if the government really wanted to clean up this mess they’d have an army of auditors examining every loan file and sending crooks to jail. Starting with Angelo Mozillo. But I’m supposed to feel sorry for the guy with the half-million dollar loan he can’t afford any more? I can’t afford a half-million dollar house, and I work and save and have no debts. Why should I want my tax dollars to help keep some guy in a half-million dollar house he can’t afford? And feel good about it? No. I don’t know about you, but I for one am tired of having to make up for the incompetent, the greedy, and the stupid.
Here’s a plan: tell the lenders that they can either write down the loans to current value, or the FBI will want to have a peek at all the loan files. If they have to eat the loss, we’ll give them some soda water to wash it down with.
There’s no way around it: there will be losses, and there will be foreclosures. Houses prices should crash. Why should we worry if they overshoot their value? That’s just incentive for buyers to come back to the market. So financing will be tight for a while: good, I say. If it’s a choice between a depression and saving these schmucks, I say, let’s have the depression. We deserve it!"

Jan. 14 2009 04:44 PM
Nico from Crown Heights

Did he really say that he knows of no cases of lending to people who obviously couldn't repay?!!! How stupid does he think we are?

"Such loans were made, former employees say, because they were so lucrative — to Countrywide. The company harvested a steady stream of fees or payments on such loans and busily repackaged them as securities to sell to investors."

For a reality check, see G. Morgenson, "Inside the Countrywide Lending Spree" in the NYT:

Jan. 14 2009 01:09 PM
Voter from Brooklyn

Listening to this interview has been galling. Obesity and McDonald’s is the same as over borrowing and Countrywide? When McDonald’s sells a cheeseburger, that is the end of the transaction. Countrywide was loaning money it knew it would not be responsible for recovering from house buyers on top of believing house values would continue to rise astronomically outpacing inflation and median income. People over borrowed only because the money was made available to them by Countrywide. If Countrywide said to borrowers “you don’t have any money and you can’t possibly make enough money in your lifetime to buy this house” then we wouldn’t be in this crisis. Sure, government and TV lied to Americans telling them homeownership was their birthright, but for nearly all of Americans, that birthright could only be fulfilled by an institution willing to lend them money. The onus in on the lenders to lend responsibly, if only as a courtesy to their investors and their own preservation. If Countrywide didn’t either create or peddle in these exotic products, consumers would not have gotten themselves in the trouble they have. This guest has done nothing but blame consumers (for whom I have no pity, by the way) and paint himself as the near hero. David trying to fight the Goliath that was Countrywide. Now he’s trying to make a buck off of his megalomania.

Jan. 14 2009 12:44 PM
Marty from Queens, NY

Under the deregulated environment created by the Clinton/Bush/Greenspan administrations, when a home loan is closed, the lender collects fees and then sells the paper. There was NO incentive to ensure that the loan was "good" ie payable by the borowwer. Loan to value ratios were manipulated - houses overvalued, incomes inflated or not verified or simply ignored. All this was the bank's responsibility to avoid. Mr. Michaelson has real gall to whine about personal responsibility and blame the borrowers. I hope he gets up every morning of his retirement and is sick to his stomach when he looks in the mirror --- but denial ain't just a river in Egypt...........

Jan. 14 2009 12:43 PM
Nick Lento from NJ

This book isn't designed to sell and make too much money. It's designed to get this perverse POV out into the public consciousness. This interview was a free advertisement for Countrywide.

By trying to tamp down the outrage they hope make it less likely that this activity will be CRIMINALIZED.

If every loan sales pitch they did was recorded on audio virtually all of these "sales" people would now be in jail because they did lie and they did mislead.

Again, this is the typical con man's "defense"; blame the sucker you just secrewed for being gullible enough.

This is almost like a rapist blaming the victim.

This book perpetuates the culture of corruption...and his deadpan delivery was sickening.

Leonard was way way way too polite to this miscreant.

Jan. 14 2009 12:41 PM
sophie from Manhattan

If you have no income, no job... it's the job of lenders to say no way, Jose.

Jan. 14 2009 12:38 PM
Peter from Brooklyn

Another question is why people with no job and no income believed they could afford to buy a home?

Jan. 14 2009 12:35 PM

Great comments! & thanks for trotting that guest by us LL.

Jan. 14 2009 12:35 PM
sophie from Manhattan

You have got to be kidding me. The lenders didn't care whether the person could afford it. They took their cut at the front end and ran. Why were loans given to people with no job, no income??

Jan. 14 2009 12:34 PM
Peter from Brooklyn

I've been listening to this discussion, and I am not convinced that we were all hoodwinked by evil mortgage lenders. Owning a home is not a God-given right. Buying a home is a very big deal. The buyer does have some responsibility for understanding what he/she is getting him/herself into. Let's not portray everyone whose home is in foreclosure as a hapless victim.

Jan. 14 2009 12:33 PM
part timer from Lynbrook, NY

Leonard, you asked, "But when people were unsure, weren't they often encouraged [to refi, etc.] when maybe it wasn't wise?" I worked part time at Wall Street Mortgage Bank in East Rockaway, and of 12-16 sales people who manned the phones each evening, I think I was the only one that was not lying to people constantly - by which I mean, in every conversation, about many critical points - and just making stuff up that was designed to convince. The management knew and didn't care. There was no integrity in any of it - and I think this was very typical of such businesses.

Jan. 14 2009 12:33 PM
Nick Lento from NJ

This man continues the con.

He's trying to take te steam out of the outrage.

He's justifying the dishonesty and the legalized theft.

He's made millons as their head of marketing and now he's written the ultimate PR cover story that it's no ones fault and it's everyone's fault.

Listen to his tone of voice; he's just trying to get his old company off the hook. This book just extends the con.

Jan. 14 2009 12:33 PM
Craig Bailey from New York, NY

Who is he kidding? Countrywide's practices did not come out of "honestly" wanting to achieve everyone's dream of home ownership. They would never have done it if it didn't mean a lot of money for them. I don't buy that there were any altruistic motives behind any of these "sketchy" lending practices.

Jan. 14 2009 12:33 PM
Dan Kaplan from Chelsea

I love how republican types are always talking about personal responsibility. The simple fact that people play lotto or go to vegas proves that people aren’t responsible with their money, and that the consequences of temptations like ARO’s had to be well known and should have been forbidden.

Jan. 14 2009 12:32 PM
NWP from Greenwich,CT

How much did Mazzillo and the guest walk away with from selling the borrowers down the river?

Jan. 14 2009 12:30 PM

This is absurd. This guy has the gall to get on the radio and promote a book on the housing collapse which was largely a result of exploitative companies like Countrywide taking advantage of a market gap and lying to people - out and out lying - about the terms of their new fancy mortgages. A relative of mine is an Ivy League-educated lawyer and she ended up with a clause in her mortgage of which she was unaware. The fact that he is capitalizing on his involvement is reprehensible and vile unless he's using the proceeds to try, in whatever small way, to support those whose lives he has destroyed.

Jan. 14 2009 12:30 PM

Who else is this chap interviewing w -- how dumb does he think Lopate and his listeners are? Very, it appears...I do admire his gall.

Jan. 14 2009 12:28 PM
MC from Brooklyn

PLEASE DO NOT BUY THIS BOOK. These damn people are always trying to make a buck. Way to work for the devil, man. Try taking some personal responsibility ...PERSONAL RESPONSIBILITY, guy. You knew you were working for a disreputable company. Jerk.

Jan. 14 2009 12:28 PM
Graham from New York

Not a good person.

Jan. 14 2009 12:28 PM
Carl from Stamford CT

Leonard: Ignorance is NOT a defense. This guy is on the right track. We were ALL wrong.

Jan. 14 2009 12:28 PM
RLewis from The Bowery

LL, Can you ask this guy if Pres. Bush is responsible at all for all his promotion of the "Ownership Society". Didn't Bush push us down this hill and now we're in one hellofva ditch?

Jan. 14 2009 12:27 PM

ha ha! you gotta be kidding me. he sounds smart enough to know exactly what was happening before it happened.

i'm reminded of when bush/powell etc. argued that nobody would have known that iraq was leading to disaster.

oh well, his right to write a book I guess.

Jan. 14 2009 12:25 PM
EM from nj

They're all guilty - those who dreamed up these products and those that were greedy enough or stupid enough to use them!

Jan. 14 2009 12:24 PM
Theodore Reimer from Brooklyn

During a recent trip to the Pacific Northwest, I saw CountyWide signs on buildings. Are they still in business? And where are they getting the money? Is TARP involved?

Jan. 14 2009 12:24 PM

Question: Was there a feeling of immorality or wrongdoing against your customers at the time?

Do you feel guilty now for being a part of this once-in-a-century bacchanal?

Do you feel that writing and/or having written this book has been redemptive for you personally?

Are you as wealthy now as you may have hoped when you accepted the job with Countrywide?

Lastly, given that your previous jobs seemed to revolve around advertising, which business did you find took the "higher ground?"


Jan. 14 2009 12:22 PM
Judith from Orangeburg, NY

I can't believe this guy. He has the nerve to say it's everyone's fault? He marketed these products that took advantage of people and now he's making profits from his book? I think it's shameful. She should apologize to the American public for the part he played in this and give his book away for free!

Jan. 14 2009 12:21 PM

Haven't interest rates only gone down during this crisis. Why when rates then readjust on the adjustable rate mortgages, are the payments suddenly so much higher?

Jan. 14 2009 12:19 PM
NWP from Greenwich,CT

His job was only to push the button. He did not know that it let the gas go into the chamber.

He's innocent.

Jan. 14 2009 12:18 PM

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