Confessions of a Subprime Borrower

by: Bobc

Sun Oct 12, 2008 at 18:20

What I have been learning is that the titans of finance who created and traded unregulated securities of debt instruments and derivatives called Credit Default Swaps involving some $62 trillion are much more likely culprits in the worldwide financial collapse. Common sense tells me that bad mortgage loans, even in large numbers, could not be responsible for the tremendous losses required to affect the entire world markets, including bankrupting the country of Iceland. The Credit Default Swap market, however, was large enough to have this effect when that house of cards crumbled.

On behalf of sub-prime borrowers who must be feeling the guilt of causing the next great depression, I wrote the following letter to Mr. Brooks at the New York Times and to All Things Considered. A sub-prime borrower's apology for causing the crash.

Dear Mr. Brooks:

I heard you say on National Public Radio All Things Considered that sub-prime borrowers should take their share of the blame for the economic crash. At first, I thought things wouldn't get so bad, but now it seems that the entire world economy is collapsing. Frankly, I was just going to keep quite and hope no one would notice that I am one of the sub-prime borrowers. But listening to your explanation of the cause of this crisis has made me feel ashamed of what my wife and I have done. I want to come clean.

Although we planned to borrow only 75K, our loan officer showed us how we could leverage as much as 150K by getting a sub-prime loan with a two-year balloon. We were a little concerned about financing so much, but the loan officer assured us we could simply come in to refinance in two years based on the increasing value of our house. So we put the first child in college and had extra money to take a much delayed vacation in Hawaii the same year.

Things were still working out right when the next year we started our second child in college, and we made a few improvements to the house. But when the balloon hit and we went to refinance, housing values in the neighborhood began to stall and we had to dig to make the balloon and the higher interest rate.

We really didn't mean for this to happen, but the equity payment had to be late a few times. We tried to readjust the payment schedule with no luck, and then we missed a payment. Things seemed to just spiral from there: collection calls, etc., you know the rest. The company who has the equity note now is taking action, and we aren't proud of this, but we're considering bankruptcy.

If we had known that by taking out this loan we might be risking worldwide economic disaster, believe me when I tell you, we would not have done it. Please accept our sincerest apology.

By the way, I have been hearing on the news some discussion about something called a CDS or Credit Default Swap that seems to have some relationship to the financial markets. Some figures I've heard are that some $62 trillion were being traded in the CDS market, and that this market has collapsed resulting in trillions of dollars in loses. The next time you're on the radio would you mind explaining what a CDS is and if they have anything to do with the crash?

In the meantime, I take full blame for this mess. I am truly sorry.

Sincerely,
a sub-prime borrower