European Stars and Stripes (Newspaper) - March 25, 2007, Darmstadt, Hesse Page 28 0 stars and str i is sunday March 25 2007 your Money foreclosure ends family financial plight subprime lending bust leaves Many House poor by Adam Geller the associated press Thornton Colo the lights Are still on inside foreclosure no a200642668 so while theres time have a look around heres the living room still covered in the worn Blue shag Angela Sneary always intended to replace with the Sheen of hard Wood and downstairs through a curtain of plastic beads is the basement where Hus band Tim was going to Knock out a Wall and put in a foosball table step this Way and the Searys Point out the places where they never could find the Cash to hang a ceiling fan install a hot tub replace the siding a Long list of abandoned ambitions that seem almost too big to squeeze into the modest four bedroom Trievel owning a Home is All about finding humor in unfinished projects but the Searys never had the luxury they ran out of Money first then time soon almost certainly be out of a Home buying a Home is the american dream Many families though Likely never would have become owners if not for the tremendous growth a new kind of Mort Gage business called subprime lending it Long seemed like a winning proposition for All parties now the costs Are becoming apparent and they Are very unsettling subprime lenders peddle new kinds of mortgages often requiring no Money Down and made at teaser interest rates that soon Rise photos by de above Angela and Tim Sneary and their dogs stand in the driveway of their Home in Thornton Colo on feb 21 their financial problems have resulted in foreclosure on the House by their subprime mortgage Lender below the Searys talk about their financial problems As they target marginal borrowers with they stand in their Kitchen on feb 21 weak credit by last year subprime Loans made up 20 percent of the Market for new mortgages but As the housing mar Ket cools thousands of subprime borrowers Are struggling to keep their Homes clearly this int How the american dream is supposed to play out the experience of fam Ilies like the Searys show How the squeeze created by questionable lending can quickly be compounded by family economic crises a Lack of planning and knowl Edge and the rapid shifts in a real estate Market that once seemed unstoppable House of dreams subprime Loans up the percentage of subprime Loans soared from 54 percent of All Loans in 2001 to 201 percent in 2006 estimated value of subprime billion 600 02 03 04 05 delinquent subprime Loans 14 percent 2 98 99 00 01 02 03 w 05 06 the Sneary family sources inside mortgage grew fast a girl a boy and then another boy in four years Tim found work doing landscape would put monthly payments at about ing in Denver mushrooming sub Divi a Little More than rent spoons it had plenty of space for three kids three dogs and six cats it Cost we thought we were getting a Deal Tim says the agent said hed find them a mortgage no Money Down they never thought to shop around agent Kent Widmar says he has no memory of the couple or the Deal but he knows his customers and subprime Loans Are the Only Loans most can get i kind of work the Bot Tom of the Market the Tough deals the people that cant get credit anywhere Widmar says youre Deal ing with people where no body else other lenders is even going to talk to them its not like you have a whole lot of choices the Searys say they expected to borrow at a fixed rate of 65 percent that Sions Angela got a Job working for an insurance company eventually they combined to make around a year in 2004 the couple set out to look at Homes in Thornton a fast expanding mostly working class suburb 20 minutes out Side Denver they loved the second House the agent showed them painted glowing Pink with a big Shade tree out front the Kitchen draw but at the closing All the numbers were higher the Searys were offered two Loans both from a Texas subprime Lender Sebring capital partners the first for 90 percent of the Purchase Price was at 831 percent set to adjust after two years the second for the remainder was at 1369 per cent the House would Cost a month to Start and it was almost certain to use Erv uus were shaped like tiny Forks and looking Back Tim wishes they asked More questions or considered walking out but everything was in boxes and they Given notice so they eyed each other nervously and agreed to work More hours then they signed the papers lending lessons the mortgage business has changed considerably when we were children the Lender was a savings and loan just like in its a wonderful life says Oliver Fras Cona a Boulder Colo attorney whose firm represents Many lenders in foreclosure proceed Ings including the Searys the Lender was loaning their own Money so they were very careful with How they Lent it today Many buyers find Loans through a mortgage broker Many of those Loans certainly subprime Loans come not from local Banks but from loan originators these companies hold the Loans briefly be fore reselling them usually to an invest ment Bank earning a profit and passing along the risk then the Loans Are bundled and resold As securities to investors the new system works Well in Many ways but the incentives driving the play ers Are very different the mortgage Bro Ker and loan originator rather than being restrained by risk pursue the profit that is the Reward for generating new business an enthusiastic Wall Street provides Cash for yet More Loans but the willingness to downplay risk turns a business of caution into a hedged bet often buyers qualify for these Loans Only because they can afford payments at the introductory rate without considering How make Good once the rate goes up while Home prices kept rising it hardly seemed a Gamble lenders and investors embraced subprime Loans High returns for Consumers with shaky credit it was easier to buy a Home easy to refinance and easy to sell for again then the Market turned and for Many homeowners the escape Hatch slammed shut see lending on Page 29
