Just what we need — a movie about the housing foreclosure crisis.
The movie “99 Homes” is making its way into a limited number of theaters this week before a wider national release starts Oct. 9. Judging from early reviews, you won’t be seeing it on the traditional big screens where Hollywood blockbusters are shown.
The premise of the movie is this: A man loses his job, gets his house foreclosed on, moves his family into a motel, and then lands a job working for the “very ruthless” real estate investor that evicted him. He then goes about helping cheat banks and evicting other people all in a bid to get enough money to move his family back into their foreclosed home.
The truth, of course, is stranger than fiction.
For starters unless the character the man plays is a slow learner, by the time the foreclosure crisis was in full swing most people figured out it would take between six to 18 months before the bank you stopped making payments to kick you out of your home. By that time you’ve save enough money to buy a luxury car.
To sell tickets, you’ve got to jazz up the story line.
So in case anyone has short-term memory issues, let’s recap what happened:
uPeople were buying more home than they could afford.
uBuyers were lying on — or at the very least not reading — loan documents that stated their alleged income. It’s the biggest purchase of most everyone’s life. How can you not sweat the details?
uUnscrupulous young Turks — the up and coming Wall Street types that got big commissions off business they brought in allowing them to live high on the hog — were taking short cuts on approving loans and knowingly blessed deals that would have prompted George Bailey of “It’s a Wonderful Life” fame to toss the paperwork into the garbage can.
uFlippers — from professionals to doting grandparents eager to raise enough cash to send four grandkids to Stanford University — leveraged their homes and investments in a bid to get rich quick.
uPeople were buying homes with little skin in the game making it easy for them to stop making payments when the financial seas got a little rough.
uOpportunists saddled with higher payments on an expensive home they could still afford to make payments on, bought a second home. After they signed on the dotted line for a bigger home with a lower monthly payment they stopped making payments on their first house. In most cases they could afford to make both payments but didn’t think it was fair to expect them to do so since home values dropped.
uHigh level financial institution executives — more concerned about their $20 million annual bonuses and $10 million yearly salaries — looked the other way even when they were told of loan improprieties.
uThe banks, once they realized they were saddled with questionable loans, then started slicing and dicing them among each other to spread the risk. In some cases as many as six different banks would own interest in one home loan.
uBuyers would leverage homes by taking low introductory rates for three years or so that would then have a balloon payment and jump to the higher rates. They did it knowing they couldn’t make higher mortgage payments down the road let alone a balloon payment. They said they were investors but they were actually gambling values would go up.
uCongress crafted “profit” tax forgiveness on home loans buyers walked away from without requiring any kind of test on financial stress. That meant a number of buyers that weren’t in trouble gamed the system by walking away from homes that had dropped in value without suffering a dime in tax consequences.
Including such tidbits gets in the way of the storyline.
To bring what really happened to the screen — the fact “victims” played a large role in their demise as homeowners — wouldn’t sell very many tickets.
The popular sentiment is the greed of Wall Street drove the housing crisis. The truth is it took a lot of little guys looking the other way, being complacent with erroneous financial information on final loan documents because they wanted a house, swallowing more house than their financial stomach could handle, and they wanted to get rich quick.
Yes there were some borrowers taken advantage of such as those with limited English skills. But it takes two to tangle — a willing buyer and someone eager to make a loan so they can generate profits.
Wall Street greed enabled the housing crisis.
But if wouldn’t have happened without the little guys playing along.
No worries, though.
Most of us will forget our fears when they start dangling 4,000-square-foot homes, low monthly payments, and promises of cashing in big after a few years in front of us.
So why not romanticize the foreclosure crisis making it about guys in black and white hats?
The truth is most of still want the world and we want it now.
That means we’re due for another housing crisis sooner or later.
If you doubt that, think back to what you swore you’d never do in the dark days of 2008.
The odds are you’ve already forgotten that promise you made to yourself to limit debt, live within your means, and be financially conservative.