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Busted

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.

Even though I had no idea how we could overcome the practical hurdles, I was already convinced that I wanted to spend the rest of my life with Patty. We poured out our feelings in long conversations on the telephone, night after night. She had touched my soul in ways I couldn’t explain and couldn’t really understand. Between my memories of the friendship we had shared as teenagers and the sad warmth that she radiated today, she was like a salvation to me. I asked her to marry me even before going out to visit her in person a few weeks later.

“You are the woman I want to grow old with,” I told her. “I’m as certain about it as anything I have been before.” Even in the delirium of the moment, that pronouncement took Patty aback. But she didn’t need much persuading. “I love you and I cannot wait to be married to you,” she responded, sounding as if she were experiencing something joyful for the first time in years. Over Labor Day weekend of 2003, I flew to Los Angeles and kissed Patty for the first time. We continued to live on separate coasts another year, flying back and forth for visits every month or so. By the spring of 2004, we were making plans for her to move east with her two youngest children in the summer and trying to figure out how we were going to pull it off with our limited resources.

Patty and I were complements—a “perfect fit,” she liked to say. She had always liked men who were brainy and even nerdy. “I don’t care what a man looks like, as long as he’s smart,” she said. To her, I was a refreshing change from the men she had known in Los Angeles. I didn’t care much about money or expensive cars. I dressed modestly and, at least at first glance, I didn’t seem to be an overbearing, self-absorbed macho. From what she could see, working at the Times was a bit like working at a university: fascinating and creative—an environment without much money but filled with very smart people. From my vantage point, Patty was a kindred spirit who also possessed things I could only imagine: an encyclopedic knowledge about fashion, literature, and pop culture; a passion for food; a shrewd but sympathetic awareness of the chemistry between men and women.

In the days and weeks following that glorious Sunday afternoon of house hunting in April 2004, I felt as if I had walked into a no-limit game of Texas hold ’em. Armed with my “lender’s letter” from Bob declaring that American Home was ready to lend me up to $500,000, I sat down with Susan, our real estate agent, to make an offer on the sweet little cottage for $400,000. “Don’t even think about offering less than the asking price,” Susan said. Fine, I agreed. “Do you want to make the offer conditional on the results of a home inspection?” she asked me. Sure, I said. Why commit myself to a house that might have a crack in the roof, right? But Susan recommended against that. Sellers wanted as few complications as possible.

Offering the full price, with or without conditions, was no guarantee, of course. Other home buyers had included “escalator” clauses in their offers—mechanisms that automatically raised their bids if any rival offered the same amount. If rival buyers had escalator clauses, they set off an instant bidding war until all but one of the escalators had reached its preauthorized limit. Within hours, I learned that the sweet little cottage had sold for $20,000 more than the asking price.

Sobered, I bid on a second house several weeks later. Once again, I met the seller’s asking price of $400,000. But this time, I added an escalator clause to raise the bid as much as $20,000. Once again, I was outbid.

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