A Shack In Arizona And The Housing Crisis-How They Came Together

I’ve been spending a largely unproductive Saturday morning browsing the Internet and came across this little gem from the Wall Street Journal. It’s the story of a woman, a ramshackle house in Arizona and the mortgage crisis. You and I have seen a lot of these before, but this one is well put together.

The little blue house rests on a few pieces of wood and concrete block. The exterior walls, ravaged by dry rot, bend to the touch. At some point, someone jabbed a kitchen knife into the siding. The condemnation notice stapled to the wall says: “Unfit for human occupancy.”

The story of the two-bedroom, one-bath shack on West Hopi Street, is the story of this year’s financial panic, told in 576 square feet. It helps explain how a series of bad decisions can add up to the worst financial crisis since the Great Depression.

Less than two years ago, Integrity Funding LLC, a local lender, gave a $103,000 mortgage to the owner, Marvene Halterman, an unemployed woman with a long list of creditors and, by her own account, a long history of drug and alcohol abuse. By the time the house went into foreclosure in August, Integrity had sold that loan to Wells Fargo & Co., which had sold it to a U.S. unit of HSBC Holdings PLC, which had packaged it with thousands of other risky mortgages and sold it in pieces to scores of investors.

Today, those investors will be lucky to get $15,000 back. That’s only because the neighbors bought the house a few days ago, just to tear it down.

The article describes in some detail how Mrs. Halterman, who hasn’t had a job in 13 years, ran up a $100,000 through serial refinancings. It brings in the local mortgage broker who originated the loans and traces the path of the mortgages from Mrs. Halterman to Wells Fargo, to HSBC and then to investors such as PIMCO.

In the end you are just left shaking your head. How could so many smart people have been so dumb? Where was the thinking man or woman who should have stood up and said this makes no sense at all?

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