Exhibit A

The Wall Street Journal printed an article on January 3, 2009 that is Exhibit A in what I have been discussing about the financial industry.  This house, or shack, was appraised at $132,000 and received a loan, a "no-doc" loan for $103,000.  It was unfit for human occupancy (or any other occupancy for that matter!).  Now, there could be an argument that the land was worth that amount, but the reality is someone had to pay that loan.  You have to read the story to understand that there is no way, no way, the lender should have made the loan.

Indeed, we can blame the borrower.  She was on a fixed income, a mix of disability, food stamps, welfare to work for a total of $3,000 a month.  She probably knew she could not afford an adjustable rate mortgage with an introductory rate of 9.5%.  But come on, isn't the lender, the mortgage broker, responsible for something here?  Turns out she was telemarketed.  Yep, someone called and told her to apply for the loan.  Then they paid for an appraisal.  They assured her she would qualify.  And the mortgage broker didn't just arrange for one loan, he made sure she got two, one his own firm lent her!

Of course, this is an extreme example.  But the bottom line is that we, as a community, will pay for this travesty, along with others that are more nuanced but as egregious.  Frankly, I regret not writing on the outside of the hundreds of direct mail pieces I received from Washington Mutual, Bank of America, Countrywide, and others: stop sending me these offers, it is immoral.  But I didn't.  

Now what?  Well, I think we begin by understanding everyone shoulders the blame.  Not just the greedy mortgage broker or the bottom-of-the-rung woman in this story.  We all went nuts during the past two decades.  We spent money we didn't have.

Second, I think we begin to realize our homes are not investments, but homes.  We live here.  We raise children here.  We sit by the fire and read.  We have holidays dinners at home.  We slam doors when we're angry and pop champagne corks when we celebrate.  We buy a house or condo as our home.  It's great that the house appreciates in value, and fantastic that we add value to it by restoring or remodeling.  But it is a home.  Using it as our credit card is not only unwise, but it changes the meaning of a place that shelters us.   It is not a home but similar to a piece of plastic with a name, number, and expiration date.  This change, from realizing our homes are not investments, is cultural.  It will be a huge shift in how the lending industry has led us to think during the past 8 or so years.  It will be hard, but a wise cultural shift to make.

Third, while this is hard for me to assert, we need some accountability.  I have yet to look at court dockets, but I can imagine there will be a lot of litigation over the predatory loans.  While I think litigation will be good, it more than likely will only name corporations as the defendants.  There are a lot of individuals in the mortgage industry that made a lot of money and who should also be held at least civilly accountable.  I would also think a few criminal prosecutions for fraud might be a good deterrent.

Our community took a hit.  We all let this happen.   Now it's up to us to fix it.  We need a habitat for humanity that fixes our culture.