Blogs & Comment

America's Subprime Unwinding

George Packer on the lingering human toll of the financial crisis

Hey, Red Solo Cup is cheap and disposable
And in fourteen years, they are decomposable
And unlike my home, they are not forecloseable
Freddie Mac, kiss my ass. Woo!

Red Solo Cup
Toby Keith

Last week, I pointed to two stories that highlighted the two-tier nature of the American economic recovery. Here are a few more. In Boston, a pair of adjacent parking spots sold at auction for $560,000.  (Those are parking spots. Not lots.) In Florida, meanwhile, Governor Rick Scott—a Tea Party darling—signed a bill aimed at making it easier for banks (or whoever else owns the debt) to foreclose on a property.

Scott, like most everyone in the U.S., is eager to put the subprime crisis behind him. It’s easy to understand why. Five years after the crash, about one in 300 houses in Florida remains in some state of foreclosure—the highest rate in the U.S.—and it still takes about 900 days for a house to move through the foreclosure process. And while Florida is, as always, an extreme example, it’s certainly not the only state still coping with subprime fallout. In fact, if you start looking for them, stories about the lingering crisis start popping up everywhere, as often as not alongside pieces touting the recovery.

In the Times Sunday, there was an A1 story on America’s increasingly promising economic prospects. But in the business pages, the big news was Gretchen Morgenson’s column on the role big-bank trustees played in overseeing billions in now near-worthless mortgage securities. The Washington Post ran a long investigative feature Saturday on borrowers who walked away from their homes only to discover years later they still owed hundreds of thousands of dollars on their now defunct mortgages. ProPublica had a piece on Former Bank of America employees testifying to gross misconduct in the bank’s loan-modification department. Bloomberg wrote about the ex-Goldman Sachs executive who bet big against the subprime market in 2008 and is now scooping up thousands of foreclosed homes on the cheap, often with the goal of renting them back to their one-time owners. And it goes on and on and on.

The human toll of the subprime crisis will linger for years. What that crisis looks like, though, hasn’t always been clear. Lucky for us, then, George Packer exists. Last month, Packer, a New Yorker staff writer best known for his writing on Iraq, published The Unwinding, a book he calls “an inner history of the new America.” A massively ambitious attempt to chronicle 40 years of American economic history through the people who lived it—from factory workers to Oprah, Joe Biden, Jay-Z and the faces of Occupy Wall Street—The Unwinding is also home to some of the most humane, affecting portraits I’ve yet read of what it meant to live through the madness and aftermath of subprime America.

Not surprisingly, Packer honed his reporting in on Florida. In recent years, the Sunshine State has become a kind of permanent American freak show, home to zombie face-eaters, and vigilante security guards who shoot black teens for wearing suspicious sweatshirts. As Packer describes it, Florida was also ground zero for the worst abuses and harshest repercussions from the subprime bubble, which, when it popped, hit Florida worst of all.

By the thousands and thousands the foreclosures came. They came to Country Walk and Carriage Pointe, to inner-city Tampa and outermost Pasco, to Gulfport and northeast St. Pete. They arrived at houses where three months of mail lay in a pile at the front door, and houses where children were watching Dora the Explorer and adults had stopped answering the phone, and motels with 20 percent occupancy, and obscurely named investment entities with no know street address. They came like visitations from that laconic process server, the angel of death.

The pure volume of foreclosures overwhelmed the Florida courts. Packer describes legal hearings there where lawyers, phoning in from their firms, would zip through dozens, even hundreds of foreclosures a day. Most were unopposed. In some, it wasn’t exactly clear who was doing the foreclosing:

The complaints were filed by such transparently named financial institutions as HSBC Bank USA, and EMC Mortgage Corporation, and BAC Home Loans Servicing, L.P., and LSF6 Mercury REO Investments Trust Series 2008-1, and Citibank, N.A., as Trustee for the Holders of Bear Stearns Alt-A Trust 2006-6 Mortgage Passthrough Certificates Series 2006-6, and Deutsche Bank Trust Company Americas f/k/a Banker’s Trust Company, as Trustee and Custodian for IXIS 2006-HE3 by: Saxon Mortgage Services, Inc. f/k/a Meritech Mortgage Services…

And on and on and on. On the rare occasions when an actual human would show up, lawyers and judges often seemed shocked. It’s a recurring theme. From the low-level shysters who peddled dodgy mortgages to the Wall Street investors who packaged them into securities and the investors who bought them, everyone involved in the subprime debacle always seems somewhat put-off when reminded that at root this was a crisis about actual people and their actual homes. When you strip down the complicated investment vehicles—now being peddled for pennies on the dollar—there are people like Jack Hamersma, a boat salesman Packer wrote about who lost his job, was diagnosed with cancer and then had his house foreclosed upon.

You can understand why people like Rick Scott are so eager to move past the subprime crisis. But its important to remember that not everyone can or will be able to put it behind them anytime soon. Some are stuck with houses worth fractions of what they owe, others have no houses at all. And for all the talk of recovery, it’s still mostly those who can afford six-figure parking spots who are doing the recovering, not those looking for somewhere to park the cars they now live in.