It is interesting to see and hear readers' comments on our Sunday story concerning a Haverhill woman and the worldwide financial crisis triggered by failed mortgages.
Some readers posting on our Web site and others calling our office questioned whether we sought to portray Marie Martinez, who purchased, refinanced and sold homes in Lawrence and Haverhill before the market collapsed, as some kind of innocent victim.
After all, that's what "the liberal media" does all the time — portray irresponsible people as unfortunate victims done in by the evils of an uncaring free market.
Others suggested that we were defending bankers and their predatory lending practices.
After all, that's what "the corporate media" does — defend market principles regardless of their devastating impact on the lives of ordinary Americans.
The point of the story was not to play some game of designating "victims" and "oppressors." It was simply to illustrate, using one local example, how extensive the mortgage crisis has become. How do giant banks and mortgage lenders in New York and California find themselves at the brink of financial collapse because of loans they made in places like Haverhill? How does an abandoned home in Lawrence end up being "owned" by a German bank, which insists it is not the owner at all, merely a representative of faceless "investors"?
The answers to these questions are found in the ways mortgage lending changed in the past two decades. There are no innocent victims here — other than the American taxpayers being asked to risk $700 billion to clean up the mess. Everyone else was in the game to make money. The borrowers, the bankers, the brokers, the investment houses, the insurers, the investors — all of them played a role in creating the biggest financial disaster seen in generations.
Marie Martinez isn't unique — not by a long shot. As reported by Business Editor Bill Kirk, the 54-year-old Haitian immigrant bought her first property in Lawrence in 1998 for $129,000. She refinanced the multifamily home in Lawrence several times, taking out tens of thousands of dollars. She managed to make a six-figure profit when she sold the property five years later for nearly $370,000.
In July 2003, Martinez used $100,000 of her profit on Stearns Avenue for a down payment on her next purchase, a home at 303 Salem St., Haverhill, at a price of $332,000. Martinez initially had a 30-year, fixed-rate mortgage for $232,000 on the home.
Beginning in 2004, Martinez began pulling money out of the house by refinancing with adjustable-rate mortgages that would soon spiral higher. But Martinez planned to sell the house before the interest rate jumped.
The story of the mortgage meltdown is one of things that did not go as planned. Martinez could not sell the house, and had already purchased another on Brockton Avenue in Haverhill. Then she lost her job. The Salem Street house was foreclosed on in 2007; Martinez hasn't made a payment on the Brockton Avenue home in months.
With the exception of her use of some home sale profits to support relatives in Haiti, Martinez's story is similar to that of many of those caught up in the housing collapse. Replace "refinancing to send a shipment of rice to Haiti" with "refinancing to buy a new Lexus" and it's virtually the same story repeated across the nation.
And the stories of the lenders who provided Martinez with ready cash is familiar, too.
Some of these companies — New Century Mortgage, Argent Mortgage, First Franklin and First Magnus Financial — have either gone bankrupt or are under investigation.
They and other lenders were more than willing to extend loans under questionable conditions as long as they could quickly sell those loans, earn their profits and let others assume the risk. Indeed, government policies encouraged them to do so.
Was this irresponsible? Of course it was. It is irresponsible to take out a mortgage one cannot afford to pay. It is irresponsible to entice people into financing dreams they cannot afford.
But as long as everyone was making money on the deals, most everyone looked the other way.
When housing prices ceased to increase at their unsustainable pace, the whole game fell apart. Now, the American taxpayers are left to pick up the pieces.
If we don't learn from this experience, we will be bound to repeat it. Yet it's plain the lesson has yet to sink in. While our reporter was interviewing Martinez, she got a phone call. It was a broker offering a deal on another piece of property.
