Edmund Andrews, an economics reporter for the New York Times, confesses that he got caught up in "catastrophic binge on overpriced real estate" and signed a "reckless mortgage" for more money than he and his new wife could afford.
What about my alimony and child-support obligations? No need to mention them. What would happen when they saw the automatic withholdings in my paycheck? No need to show them. If I wanted to buy a house, Bob figured, it was my job to decide whether I could afford it. His job was to make it happen.
"I am here to enable dreams," he explained to me long afterward. Bob's view was that if I'd been unemployed for seven years and didn't have a dime to my name but I wanted a house, he wouldn't question my prudence. "Who am I to tell you that you shouldn't do what you want to do? I am here to sell money and to help you do what you want to do. At the end of the day, it's your signature on the mortgage - not mine."
Andrews and his family aren't all that bad off, but my mouth got all cottony while reading this as I extrapolated from his story to the millions of people who made similar deals under much more dire circumstances. A chilling first person tip-of-the-iceberg tale. (via the laboritorium, which calls the piece "an instant classic of economic crisis journalism")
Update: According to a nice bit of reporting by Megan McArdle, Andrews failed to mention that his second wife has declared bankruptcy twice, once while married to Andrews.
Moreover, pesky bad luck isn't really the picture painted by either filing. Rather, Ms. Barreiro seems to have spent most of the last two decades living right up to the edge of her income, and beyond, and then massively defaulting. If you structure your finances so that absolutely everything has to go right, it's hard to blame the mortgage company when you don't quite make it.
Andrews has been admirably open about many of the poor decisions and the wishful thinking that led him deep into debt. Nonetheless, he has laid much of the blame onto irresponsible bankers and mortgage brokers. The missing bankruptcies substantially undermine this basic narrative arc of Andrews' story. Particularly in his book, the bankers are the villains, America's current troubles are the inevitable denouement of their maniacal greed, and the Andrews household stands in for an American public led, by their own greed and longing and hopeful trust, into the money pit.
Seen through this lens, it's not so much that Andrews was done in by a overly large mortgage...it was that he married a financial anchor.
Update: Andrews responds to McArdle's claims:
These bankruptcies did occur, but they had nothing to do with our mortgage woes. They were both tied to old debts from before we were married or bought a house. They had nothing to do with my ability to get a mortgage; nor did they have anything to do with our subsequent financial problems.
And McArdle responds to his response. (This is getting complicated!)
Andrews seems to now be arguing that the Chapter 7 filings are not relevant because they didn't affect his ability to get a mortgage. But of course the article and the book is not just about him--rightly, because unless your marriage is pretty dysfunctional, it's a financial partnership. The two bankruptcies seem to reveal that one partner has demonstrated a historic inability to live within their means. So though the bankruptcies don't tell us anything about their ability to get a mortgage on their house, they may tell us quite a bit about their willingness to take on a mortgage. This decision is at least as important as the bank's. I'm sure banks would have given me all kinds of stupid mortgage loans in 2004, but I didn't avail myself of the opportunity.