MELISSA BLOCK, host:
From NPR News this is ALL THINGS CONSIDERED. I'm Melissa Block.
ROBERT SIEGEL, host:
And I'm Robert Siegel.
Several books have been published about the subprime crackup, the housing bubble and the financial meltdown, but "Busted" by reported Edmund Andrews is special. Andrews covered it all for The New York Times, and he's written a concise and lucid account of how the banks and hedge funds invested in securities that were huge bundles of risky mortgages, home loans that were made to people who had no business borrowing the money they did.
What is compelling and special about Andrews' book is that he was one of those people. As he was writing about the pit of financial quicksand that millions of Americans were descending into, he himself was sinking as fast as anyone. "Busted" represents his attempt to find the people up the line of the financial system who enabled his profligacy. And he's with us in the studio.
Mr. EDMUND ANDREWS (Author, "Busted: Life Inside the Great Mortgage Meltdown"): Hi.
SIEGEL: Let's start with the basics. How did a New York Times reporter with a salary over $100,000 wind up on the brink of foreclosure, if not bankruptcy?
Mr. ANDREWS: Well, as you can imagine, I've asked myself that question quite a few times. The short answer is that, first, I was divorced and trying, and desperately in love and eager to get remarried, but I was carrying huge child-support payments. And so I was in a very delicate, fragile financial situation but wanted to buy a house to start this new chapter in my life.
The longer answer to that question is that I had lenders falling over themselves to give me the money, to lend me a half a million dollars. They were begging to lend me the money. They didn't care what my situation was. They didn't care how I might or might not be able to repay it. And they were actually willing to give me a good rate.
SIEGEL: These were people who, if they'd asked, I assume you would have told them I owe 4,000 a month to my ex-wife for her and the children, and that comes out of my salary. It was 120, 130,000...
Mr. ANDREWS: Oh, that is right. Basically the situation I had in 2004 was that my take-home pay, if I didn't save for retirement, was about, oh, 7,000, a little more a month. And my child-support payments were $4,000. So I at the start had a take-home pay of about $2,700, and that's all. That was pretty much the equivalent of the mortgage payment each month.
SIEGEL: How did you get a loan that big when the monthly payment would almost equal your income?
Mr. ANDREWS: Well, that was the mind-boggling part. Even at that time, I was just amazed by what was possible. Essentially, you've heard of liar's loans where people don't have to document their income, so they wildly exaggerate how much they get and qualify for a big loan.
In my case, it was crazier than that. I didn't even tell them what my income was. I literally left that income box blank. And they went ahead with it anyway, strictly, entirely on the basis of the fact that I had a good credit score at the time, and that I had a job, and basically that I was breathing.
(Soundbite of laughter)
SIEGEL: That got you a half a million dollar loan.
Mr. ANDREWS: That got you a half a million dollars.
SIEGEL: Now, you knew how hard this would be to pay off that loan every month. So put us through your thinking, if we can call it that, as you're taking on a mortgage that burdensome.
Mr. ANDREWS: My thinking was it would be very, very tight but we could pull it off. But basically I did know this is really the biggest gamble of my life. On the other hand, you know, I had a chance for the greatest love of my life and that was really important to me.
SIEGEL: Your mortgage broker, actually you weren't the odd case for him of this. I mean he was accustomed to...
Mr. ANDREWS: No, my mortgage broker was an expert on this. He prided himself on handling, you know really difficult situations. And he had to make a couple of different runs at this before he was able to pull it off.
SIEGEL: And in a way what made this possible, at least at the beginning, was another source of credit apart from the mortgage, which was your credit cards.
Mr. ANDREWS: That's right. You know, when I started this process back in 2004, I had a great credit score, great credit rating, and I could borrow tons of money. And what we didn't expect was that I was going to be falling behind on basic expenses month after month after month. And to my horror, it wasn't long before I realized we were running up about $2,000 a month, on average, in credit card debt. And it quickly began to just overwhelm us.
SIEGEL: There's a moment in the book when you're really sinking in credit card debt and the mortgage, and you access your 401(k) and it describes what many, many thousands of Americans have done in various ways. But you describe it.
Mr. ANDREWS: Well, this was a moment where I wasn't thinking too clearly in the panic of my situation. But I decided I was going to borrow about 10, 11, $12,000 to just clear all of my credit card debts. Then I decided, heck, I would go a little bit further. I would give myself a buffer, so I borrowed more money from the 401(k). And I figured this is a great way to just make sure I wasn't having a problem. And I would borrow money from myself and I'd be running up even higher monthly payments to my 401(k)...
Mr. ANDREWS: ... and getting overall more in debt.
SIEGEL: A tribute to how much people could borrow, just a couple of years ago.
Mr. ANDREWS: Well, it was extraordinary. And what was most extraordinary was in 2006, where I was really truly overwhelmed with credit card debt, and I actually went to my mortgage broker kind of like, you know, a crack addict going to the dealer. And he arranged sort of double-hop refinancing where I borrowed more money, 50, $60,000 more. Used that to pay off the credit cards that boosted my credit score...
SIEGEL: Mm-hmm, by going further into debt.
Mr. ANDREWS: Yes, by going further into debt I was able to improve my credit scores, and get a better deal on a mortgage.
SIEGEL: At the beginning of "Busted," of your book, you say that while you made a great financial mistake about this house and your mortgage, this is not an apology, the book. Whatever you got wrong, there were a tremendous number of people making money assisting you in getting it wrong, and encouraging you to get it wrong.
Mr. ANDREWS: Yeah. I don't consider myself a victim and I don't feel that I have any moral claim on being bailed out by the government or anybody else. That said, I really don't think I need to apologize for my mistakes, because the country was in a situation at that moment where the whole financial system was enticing and enabling and encouraging everybody to borrow as much as they could.
And the decisions that were made at the lender level and at the Wall Street level were far more cynical and reckless than anything an individual consumer could have done.
SIEGEL: One thing I want you to talk about a little bit is sense, I certainly get, from reading "Busted" and it's happening throughout the book, is that when you spend money and generally when we spend money on a house, or, you know, how many rooms should the house have, where should it be, these aren't simply ledger book decisions. These are decisions about our personal lives and about where we live, whom we live with, what our hopes are for our children, whether they'll be able to stay with us or not. They aren't just things you figure out with a calculator.
Mr. ANDREWS: That's absolutely true. And I don't think I understood that myself at the beginning at all. But these are very personal decisions. We make decisions often both by denying some of the hard choices we should be making, or we become a little bit blinded by the passions we have, be they for owning that dream house, or the love of your life, or that quick overnight killing.
SIEGEL: Have you managed to keep paying your mortgage or have you not been paying?
Mr. ANDREWS: No. As a matter of fact, I am about seven months behind on my mortgage. And we could arguably manage the house with a modified loan. Although to be honest, I kind of have my doubts that we will be able to hold on to the house. I think, one way or another, we'll probably have to move. That said, I've got the love of my life and that is worth a lot.
SIEGEL: Edmund Andrews, thank you very much for talking with us.
Mr. ANDREWS: Thank you for having me.
SIEGEL: Edmund Andrews' book is called "Busted: Life Inside the Great Mortgage Meltdown." There is an excerpt from the book in this week's New York Times Sunday magazine.
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