If You Are Already Angry About the Bailout, Don’t Read This

If I thought I was angry about the housing and mortgage crisis before, an article in Sunday’s Providence Journal about many actual cases of mortgage fraud in Rhode Island has escalated my anger to a level where I would not trust myself to be in the same room as Chris Dodd and Barney Frank, and I will not sleep until liberal Democrats like Obama are defeated. The article gives specific instances of how low-income people were prodded by realtors and lenders into accepting huge subprime mortgages to buy houses they could not possibly afford. They are all in default and all have lost those houses, and we, who worked and saved and acted responsibly are going to pay the tab for them and for radical liberalism run amok. Yes, there was greed and fraud involved, and yes, the victims who signed on to these impossible mortgages bear a lot of responsibility for this crash, but the main culprits are liberals who think our society is evil and who are trying to transfer wealth from those who earn and plan to those who do not.

From the beginning of time, whenever a government program has been put in place to provide benefits to a particular class of people, con-artists and people who might not ordinarily get caught up in immoral and even criminal activities seem to come out of the woodwork to scam and corrupt the process. With Fannie Mae, Freddie Mac and the Community Reinvestment Act providing the framework and the funds, this has been the story behind the worst economic crisis in 75 years, and blaming the Bush Administration in order to elect the Democrats who caused it will be the epitome of putting the foxes into the hen house, and then they will pay no price for their insanity and their corruption.

Most of us know by now that this whole mess started with an attempt by liberal Democrats to extend home ownership to poor people who could not qualify for conventional mortgages, and then the Clinton Administration created a huge expansion of this process. When the Bush Administration and Senator McCain tried to put the brakes on, Senator Dodd and Congressman Frank managed to stifle their attempts, while Democrat cronies now involved in the Obama campaign made off with millions. The examples cited by the Journal were not on welfare, they were hard-working people who happened to work in low-paying jobs. In Rhode Island, most of the recipients who received this poisonous largess were Blacks, Latinos and “Native Americans”.

They tried to meet their obligations, but a simple calculation would have revealed that this was impossible. Now they are much worse off than they were before. Talk about unintended consequences of liberal foolishness and radical hatred of those who work and succeed in realizing the American dream.

Make sure everyone in your circle of friends understands the realities of this situation; make sure Obama is not elected.

The article is a long one and needs to be read in its entirety. Unfortunately, the internet version does not include many of the captions and exhibits that appeared in the actual newspaper version.

A street struggles in Providence

October 5, 2008 Providence Journal (Excerpts)

PROVIDENCE — The mail keeps coming, long after the residents are gone.

Grocery store circulars, water bills, medical bills and notices from loan-servicing companies addressed to houses the postman knows are vacant. The undeliverable mail gets stacked in the back of the postal truck.

In zip code 02907 of the city’s West End, where the house-foreclosure rate is more than six times the statewide average, postman Mike Ferreira’s delivery route is shrinking.

On Bellevue Avenue, homeowners who plant flower gardens and sweep their front steps live next door to boarded-up triple-deckers with weedy yards and trash-strewn sidewalks. Foreclosures have a way of rotting neighborhoods like cavities, from the inside out.

Five of the 49 houses on one block of Bellevue Avenue are vacant. And this is one of the better streets.

Here, in the house with the icicle lights, is the Fernandez family. There, with the SUV parked out back, is the Vallejo family.

The homeowners of Bellevue Avenue are janitors and cab drivers and rental property managers — many of them first-generation immigrants who bought into the American dream of homeownership.

Now, these homeowners who mow their lawns and trim their hedges and paint their front porches are angry. They’re angry at tenants who can’t or won’t pay their rent.

They’re angry at thieves who break into the boarded-up houses to steal the copper.

They’re angry at the litter collecting on their sidewalks.

And they’re angry because some of them, too, are losing their homes.

BELLEVUE AVENUE is stitched into a patchwork of residential streets in the city’s West End and a smaller slice of Olneyville that form a one-third-square-mile swatch of the city which the census bureau calls Tract 14.

The neighborhood between Cranston and Dexter streets is a checkerboard of two- and three-family houses where, during the 1930s, Russian, English, Irish, Polish and French-Canadian immigrants lived. By the turn of this century, over half of the residents — 55.7 percent — were Latino, according to the 2000 census.

During the housing market’s peak in 2006, more than 6 in 10 loans for houses in Tract 14 were risky “subprime” mortgages — the largest concentration anywhere in Providence County, according to an analysis by The Center for Responsible Lending, a nonprofit group in Washington. The biggest share of subprime mortgages — 67.3 percent — went to Latino borrowers.

Subprime loans, designed for borrowers with blemished credit, typically carry high interest rates and fees. During the first half of this decade, their use expanded dramatically around the country, especially among Latino and African-American borrowers.

Lenders seeking to enlarge their portfolios in Rhode Island discovered a large untapped market among the state’s growing Latino population, which the census bureau last year estimated at 115,000, or about 11 percent of the state’s population. By 2005, more than half of the roughly 5,700 mortgages made to Latinos in Rhode Island were subprime, compared with less than 20 percent in 2002, the Center’s data shows.

Lending practices once heralded as spawning the greatest expansion of homeownership in America are now being blamed for setting off the worst financial crisis since the Great Depression.

Lawmakers in Washington Friday approved a $700-billion taxpayer bailout to shore up world financial markets. But it remains to be seen whether that will help residents on streets such as Bellevue Avenue.

TWO DOORS down from a boarded triple-decker, a small boy holding an Ironman action toy peers out the doorway of a porch trimmed with the icicle lights as his father collects the mail.

Two of the three mailboxes remain empty. The tenants have moved out, said the owner, Walter Fernandez.

Upstairs, the owner’s wife, Janice, cooks lunch in the kitchen as their 4-year-old son, Wally, stretches out on the living room floor with a coloring book. The walls are covered with colorful paintings by Dominican artists.

The couple, both immigrants from the Dominican Republic, bought the three-family house at 129-131 Bellevue Ave. three years ago. At the time, they both worked — he as a janitor, she as an administrative assistant for a property-management company — and lived in a $700-a-month rental in Providence.

They looked at more than 60 houses, Janice Fernandez said, before they chose this one. Built in 1922, the house has decorative moldings and original hardwood kitchen cabinets.

In November 2005, the three-family house was selling for $280,000.

“They put everything so easy,” said Walter Fernandez, who struggles with English.

“Why pay rent,” his wife, Janice, recalled the broker saying, “when you can buy your own house?”

Their loan application stated that their household income was $3,500 a month — even though Janice said it was actually closer to $2,000 a month. Their mortgage broker also listed on their loan application another $1,850 for rental income that they would receive from the two apartments which they had agreements to lease. That raised their annual income on the application from $42,000 to $64,200.

The broker, whom they knew and trusted, arranged for two mortgages — a $224,000 mortgage to cover 80 percent of the loan, and another $56,000 mortgage for the remaining 20 percent. Their payments on the “80/20” loan were $2,200 a month….

Not only would they have to rely on the rental income to pay their mortgage but also to pay for water, electricity, heat, food and other household expenses.

Janice Fernandez said she was worried about how they could afford such an expensive house, but the broker reassured her. If they rented the other two apartments for $700 and $750 each, they’d have to pay only the remaining $750 –– or roughly the same as they used to pay in rent….

Manelik “Manny” Vallejo drives a 1999 gold Ford Explorer van with a cracked windshield and letters on the rear window that read in English and Spanish: “If it causes you envy … work harder like me.”

Vellejo runs his own taxicab service. He and his wife and their five children, ages 8 to 18, used to rent an apartment in Providence for $1,000 a month. Back then, his wife was working in a factory and earning about $300 a week. Together, their household income was just under $34,000 a year.

In mid-April of 2006, he called a real estate agent whose name he’d seen on signs. They arranged to meet on Bellevue Avenue and she showed him two houses: a three-family at 96-98 listed for $310,000 and a two-family at 212-214 for $305,000.
“I like both,” he told her.

He wasn’t sure he could even get a mortgage; his wife had stopped working because of health problems. Their household income had dropped to about $18,000 before taxes. But he figured it was worth a try.

“She [the real estate agent] made me sign some paper,” Vallejo recalled, “and a week later she says, ‘you got both houses!’ I say, what I need both houses? I need one!”
Vallejo says he didn’t understand at the time that the papers he’d signed were purchase-and-sales agreements.

He couldn’t imagine how someone with his income could get $600,000 in loans. “How can it get approved?” he said.

In June 2006, Vallejo received the same type of 80/20 mortgage as his neighbor Walter Fernandez. Vallejo’s loan documents show that the first mortgage on the house where he and his family live carries an interest rate of 9.3 percent. The second mortgage has an interest rate of 13.5 percent. At the time, the rate on traditional, 30-year fixed rate mortgages was between 6.6 percent and 6.86 percent.

Vallejo tried to keep up with his mortgage payments. He worked 10, 12 hours a day. He rented one upstairs apartment and posted a “For Rent” sign for the other. He found two families to move into the second house. But one family left after a month. Another stayed a year and then moved out owing money for gas.

To pay his bills, Vallejo borrowed money from friends and “on the street” from cash lenders. He fell behind on one mortgage, then the other.

He lost his rental property at 212-214 Bellevue to foreclosure last January.” Providence Journal