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Excerpt from Busted: Life Inside the Great Mortgage Meltdown

A New York Times economics reporter details how he took out a subprime loan and nearly defaulted on his mortgage.

He thought for a moment, and then broke into a wide grin. If I had gone more than three years without defaulting, he said, I had probably validated my lender’s calculated risk after all. “They looked at you, saw your steady job history and saw that you had always paid your bills, and they were betting that you would do almost anything to avoid defaulting. And they were right,” he said. “I bet they’ve made money on you already.”

Greenspan’s initial question had been a fair one. Why did I do it? Why didwedo it? Why did millions of seemingly sane adults suddenly take leave of their common sense and load up on home mortgages they could not possibly manage? Why did we all jump off the cliff together?

We all had our reasons. Some of us were desperate to fulfill the dream of owning our first home, of arriving in the middle class. Others craved a bigger house, a newer house, a better neighborhood. Still others were dazzled by the seemingly surefire profits from soaring real estate prices.

I had two utterly compelling reasons for taking the plunge. The money was there, and I was in love.

The fever for romance and the speculative fever to get rich have a lot in common. Both are driven by primordial hungers and the allure of once-in-a-lifetime opportunities. Both evolve through a series of escalating gambles. The first is small and cautious—a sly flirtation, or a lowball bid on a condo. But each successful payoff emboldens you to raise the stakes. If the conditions are right, you can escalate very quickly from the harmless flirtation to the languorous dinner, the first kiss, the torrid weekend, and, ultimately, putting your future on the line.

The same can be said for flipping condos in Miami or Las Vegas.

Each winning roll of the dice seems to confirm the strategy and provides more money to raise the stakes. Prudence and patience become dull and petty. If you’re on a roll, it’s time for big ideas, bold decisions, and heroic leaps of faith. It’s all about adventure, danger, and fantasy.

In my case, the twin fevers of romance and housing collided on a glorious Sunday afternoon in April 2004. It was the kind of spring day that was perfect for both lovers and real estate agents. The magnolias and azaleas were ablaze in pink and purple. The young grass was fresh and bright green, and the soft clean breeze felt alive with possibility. On a day like that, even a four-bedroom rambler could look like a dream home.

I had decided on a whim to stroll through some open houses for sale in a modest tree-lined neighborhood in Silver Spring, Maryland. By any ordinary measure, I knew, I could not remotely afford to buy a house. But touring them seemed like a cheap form of entertainment, a harmless bit of voyeurism and fantasy.

At forty-eight, I had separated from my wife after a twenty-one-year marriage and was handing her more than $4,000 a month. I could barely make ends meet in a one-bedroom rental apartment, but I wanted desperately to start a new life with Patty, who was by then my fiancée. She would be moving from Los Angeles to Washington in July, and we would need a home with enough space for ourselves and her two youngest children, as well as for my own boys on the weekends. I had assumed we would start by renting a house or an apartment, but I knew enough about the new breed of mortgages to understand that it was at least theoretically possible to buy something.

The compulsion hit me when I walked into a three-bedroom cottage at the end of a tree-lined lane. The asking price was $400,000, which was low for the area. It was small, but immaculate and homey, and I immediately imagined how it could hold Patty and our mix of children. I felt a rush of sentiment and adrenaline. It was perfect! It was a sign from God. We would buy it, we would love it, and we would be living with our children and each other in our little paradise. I had to have it!

I couldn’t afford it, but that didn’t mean I couldn’t buy it.

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