American Nightmare: Predatory Lending and the Foreclosure of the American Dream

Rich Lord has been an investigative reporter for many years, and it shows. This is not a "ride the wave" exercise in hype. Lord documents both individual abuses in his particular area (Pittsburgh) and patterns of abuse. He makes it clear that a significant subset of the worst predatory situations are triggered by middle men who drive around offering to do home repair work, and incidentally offer to prepare paperwork for refinancing. They always collect the money from the homeowner and also, sometimes, a finder's fee from the refinance agent. The agent is therefore legally guilty, at worst, of lax oversight, and the homeowner is lulled by the (often true) assertion that the construction guys and the refinance guys "often work together." Often, the middle men also avoid responsibility by saying they "fill out the paperwork in the way that's needed to make the refinancing happen, and that otherwise that old lady's porch would have collapsed." It's a completely circular pattern of deniability, and it takes someone of Lord's persistence to tease out who knew what when, who should have known what, when, who's intentionally in cahoots, etc. He also traces the effect of selling loans from one lender to another. We have heard a lot of political rhetoric about "evil corporations," and a lot about "lying lenders"--and both do exist. But even now, we very rarely see how the whole pattern plays out. This is a very valuable book, made more so because it deals with a "non-sexy," very all-American housing market like Pittsburgh, where housing prices never went through the roof. It's a region where a lot of people with fixed, non-mysterious incomes have lost houses worth, say, $30,000-$100,000 based on loans of, say, $5,000 to $60,000. It's a strikingly good model for what's wrong throughout the US lending and housing markets. It's incidentally also a stark expose of what declining real wages and benefits do to the US economy. BTW, I notice that the one bad review of the book doesn't actually review the book, so much as it casts aspersions on anyone who might "whine" about any part of the loan industry. I don't appreciate reviews that leave me wondering if a person has read the book or not. I'm not saying the reviewer has not read the book. I appreciate the full disclosure (that the reviewer works for the industry being put under the microscope). I also understand that it's probably illegal, and certainly immoral, for the reviewer to comment on individual cases in the book, if there's some inside information. But it would sure be nice if the critical review actually provided the same sort of painstaking look at the situation from the lender's agent P.O.V., instead of basically trashing borrowers for borrowing too much, in a blanket sort of way.

Journalist Richard Lord's book "American Nightmare: Predatory Lending and the Foreclosure of the American Dream" takes a good hard look at the subprime lending industry in America. The facts here are astounding. Basically, everyone thinking about buying a house, or refinancing a house needs to read this book before making any decisions. There's no law against stupidity, naivety, or ignorance, and the subprime industry in America preys on people who simply don't know any better. According to Lord, the subprime industry existed for years on the fringes of the housing market, but now, subprime is BIG business. In California alone, subprime mortgage loans represented only 4% of all mortgage loans in 1993 but swelled to 20% of the entire California market in 2005. With aggressive marketing tactics, the subprime lending industry lures in all sorts of borrowers. In the past, the subprime industry fed off of those with shaky credit, and financed people who had few other options. But that is changing. Subprime lenders now hook borrowers who have much better options. Lord includes many anecdotal stories of people who owned their homes and then were systematically stripped of their equity as they refinanced. It's easy to shirk off the troubles of those who refinance due to mega credit card debt, and then simply max out those cards again and again. But some of the stories here are just wicked. Lord explains that subprime lending strategy is "Target, Trick, and Trap." Subprime lenders are not upfront with closing costs, hidden fees, and percentage rates. They offer pleasant terms, lure the borrower in, and then lower the boom with the real figures at closing. In several instances, mortgage companies grossly exaggerated the buyer's income, or the value of the house in order to secure the loan and didn't mention a little balloon payment of $50,000 due in a few years. Lord's examples include people who owned their homes free and clear and then were approached by contractors who received kickbacks from mortgage companies for arranging loans. This work is often outrageously priced, never completed, and the homeowner is left with a house that cannot be sold, and with payments that cannot be met. Lord also quotes instances when loans were made with impossibly high payments. Yes, it's a buyer beware situation, and no consumer should agree to make payments that exceed what they can afford. However, it happens. Debt-ridden consumers who have a history of making poor financial choices make yet more when offered an escape route from debt. But companies who do not disclose the finer, nastier points of the loan skirt the edge of illegal lending practices. One homeowner employed a lawyer to fight the mortgage company trying to foreclose. The lawyer was astounded at the payments her client agreed to, and asked why would a lender approve a loan that cannot possibly be paid back. The book explains that these loans are bundled together and sold as securities on Wall Stree

Many homeowners who can't borrow from banks have relied on the subprime lending industry for mortgages - an industry which has increasingly assessed huge fees and then foreclosed on the house when a buyer couldn't make payments; in effect becoming a predatory lender. American Nightmare: Predatory Lending And The Foreclosure Of The American Dream is one of the first to probe in detail the methods of predatory lending sources, discussing the plight of borrowers who have been taken, lenders cheated, and state efforts to regulate the industry. An intriguing title all pre-homeowners should read!

This Book is concise, informative, and easy to read. Not highly technical, it is full of anecdotal stories. The layperson can read through its pages and keep saying, Oh My God, that's what happened to me. That's my story. How can this happen? How can Banks and other lending institutions get away with this? It is a clear case of, What you don't know will definitely hurt you. Knowledge is power, and Richard Lord puts the power back into the consumer's hands. Like lemmings running headlong towards the cliff, the american borrowing public are rapidly racing for that precipice. All too many have fallen over and disappeared into the ether of predatory victimization. Read and inform yourself, before you become one of the tens of thousands of victims, herded like cattle, into that mischievous money pit,from which most never recover. A must read for all those who want to be informed before, during, and after personal financial disaster strikes! Concerned Citizen