LINDA WERTHEIMER, Host:
A year and a half ago, NPR News and THIS AMERICAN LIFE teamed up to produce The Giant Pool of Money, a program that explored what we thought at the time was the worst financial crisis the U.S. had seen in decades. After that show aired in May 2008, the crisis, of course, did get much worse. We've asked Adam Davidson, part of NPR's Planet Money team and one of the story's original reporters, to find out how the people he met last year are doing now.
ADAM DAVIDSON: For me, Clarence Nathan embodies the subprime mortgage crisis. When my co-reporter Alex Blumberg and I met Clarence in Spring 2008, the mortgage catastrophe was still a relatively new thing. Clarence told us that he had three part-time, not very steady jobs, and none of them brought in very much. But none of that mattered when he applied for a huge home loan. Nobody asked him anything about how much he makes or how likely he is to pay the loan back.
CLARENCE NATHAN: It's almost like you pass a guy in the street and you say, can you lend me $540,000? And he said, well, what do you do? Hey, I got a job. Okay. I mean, it seems as if it's that casual, even though there are a lot of papers that get filled out, essentially, that's the process.
DAVIDSON: Would you have loaned you the money?
NATHAN: I wouldn't have loaned me the money, and nobody that I know would have loaned me the money. I mean, I know guys who are criminals that wouldn't lend me that money, and they'd break your kneecaps. So, you know, yeah, I mean, I don't know why the bank did it. I'm serious. I mean $540,000, a person with bad credit.
DAVIDSON: Back then, a year and a half ago, Clarence had not sent a mortgage payment in for almost a year. He was waiting for the lender to get in touch to let him know if he was going to lose the house or get a loan modification or what. He hadn't heard anything from anyone. Alex and I caught up with him the other day.
So, current living situation?
NATHAN: Is the same.
DAVIDSON: The same house?
NATHAN: Same house, same conditions.
DAVIDSON: And at that point, you had not - you hadn't paid a mortgage bill in a while, and you just didn't know what was going to happen.
NATHAN: Right. Still don't.
DAVIDSON: And still haven't paid?
NATHAN: Right. You know, nobody's made any efforts to negotiate it out.
DAVIDSON: This is surprisingly common. With so many people in default on their mortgages, the foreclosure system just can't keep up. Just this week, the Wall Street Journal reported that right now in the U.S., there are more than 200,000 people just like Clarence more than year delinquent on their mortgages, yet the lender has not yet begun the foreclosure process. It's not clear why. Some say the lenders just don't have enough staff. Others say they're waiting until house prices start going up again. Why foreclose on a house that's now worth less than the mortgage itself?
Richard Campbell was not as lucky as Clarence. When we met him back in 2008, his lender was already trying to take back his home. Richard was a Marine. He fought in Iraq. He's a big guy, well over six feet, and when we met him, he was trying to keep the bank away.
RICHARD CAMPBELL: It got to the point where my son had $7,000 in a CD and I had to break it, and I mean that really hurt because I was saving that money for his college. It's like you can't have a future. They put you in a situation where after a while, you're going to fail. And if you don't have anything saved, you can't do anything. It's hard.
DAVIDSON: There are also a lot of people like Richard. He can afford his mortgage, well, he could if the mortgage rate was anything close to normal, you know, like 5 percent, 6 percent, I mean, even 7 percent. But Richard says his mortgage broker lied to him and put him in a mortgage with one of those teaser rates. It started out fine, but by spring 2008, it hit more than 11 percent. That's like buying a house on a credit card. Richard was fighting to get his rate adjusted, and he let us tag along.
KERRY CAMPBELL: Kerry Campbell, nice to meet you.
CAMPBELL: How you doing?
CAMPBELL: Good, how you doing today? Did she process you up front?
CAMPBELL: Yeah, she did.
DAVIDSON: We're at the offices of Neighborhood Assistance Corporation of America, NACA. It's a homeowner advocacy group. Kerry Campbell, who's no relation to Richard, reviews the original mortgage application that the broker filled out. Richard has never seen it before.
CAMPBELL: Here it's saying your base employment income was $16,250 a month.
(SOUNDBITE OF LAUGHTER)
CAMPBELL: $16,250 a month. That means your salary on a yearly basis would be making - you're making just under $200,000 - 195, to be exact.
CAMPBELL: I wish. You - in 2005, right, and here's my 2005 taxes, I was making $37,000 a year.
DAVIDSON: When I met Richard last year, I thought he may just well be the ideal candidate for mortgage relief. He was lied to by his broker, a broker who also lied to the lender. Richard is a veteran. He's a solid guy who's eager to pay what he owes, but can't afford a ridiculous loan. And last year with the system overwhelmed by millions of Richards and Clarences and lots of others, Richard could not get anywhere with his effort to get his loan modified.
So when I knew I was going to see him early this week, I was worried. I thought for sure he's lost everything. Well, I have to say it makes me very happy to be able to report he's still got the house.
CAMPBELL: With the help of NACA, the payments were cut in half. It's very manageable now.
DAVIDSON: Turns out, the system did work out for Richard. He qualified for President Obama's mortgage relief plan. It was not easy. Richard spent much of the last year and a half fighting with his lender, endless hours on the phone begging them to sort things out. He says he was two days away from foreclosure. Then one day, he picked up the phone, a guy named Peter was on the other end, and Peter said...
CAMPBELL: Mr. Campbell, we have good news. You know, we're able to modify your loan, and these are the terms. And then he started telling me the terms and, you know, tears started coming to my eyes when he said that we're going to go from 11 and a quarter down to 3 percent. Like, when I talk about it now, I still get that warm and fuzzy.
DAVISON: What'd you do? Did you call your fiancee? Or how'd you handle it?
CAMPBELL: Oh, yeah, no. I ran around the living room, and then I went and I grabbed her and I picked her up. And she's like, what's going on? And then I told her, and then we started jumping up and down. It was a beautiful feeling, beautiful feeling.
DAVIDSON: I realized checking in with these guys that today we don't hear as much about the original subprime crisis. With the financial meltdown, the recession, the government bailouts, it's hard to remember that this whole thing started simply: a whole bunch of people got really big loans from banks to buy homes that they just couldn't afford.
Adam Davidson, NPR News.
WERTHEIMER: Chicago Public Radio's THIS AMERICAN LIFE will air an updated hour of The Giant Pool of Money throughout the weekend on public radio stations around the country.
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