Michael Phillips of the Wall Street Journal tells the story of a shack in Arizona owned by a woman who hasn’t worked in 13 years that was valued at $130,000 two years ago by a crooked appraiser and mortgaged by a broker who was paid $10,000 in fees and took no loan risk.
Then Phillips tracks the loan through Wells Fargo to HSBC, where it was packed into a mortgage-backed security, rated Triple-A by Moody’s and S&P, and sold to, among others, the Oklahoma Teachers pension plan and PIMCO.
Two years later, after the foreclosure, the shack was recently sold for $18,000. The current owners of the loan might get 10 cents on the dollar.
WSJ: The story of the two-bedroom, one-bath shack on West Hopi Street, is the story of this year’s financial panic, told in 576 square feet. It helps explain how a series of bad decisions can add up to the worst financial crisis since the Great Depression.
Less than two years ago, Integrity Funding LLC, a local lender, gave a $103,000 mortgage to the owner, Marvene Halterman, an unemployed woman with a long list of creditors and, by her own account, a long history of drug and alcohol abuse. By the time the house went into foreclosure in August, Integrity had sold that loan to Wells Fargo & Co., which had sold it to a U.S. unit of HSBC Holdings PLC, which had packaged it with thousands of other risky mortgages and sold it in pieces to scores of investors.
Today, those investors will be lucky to get $15,000 back. That’s only because the neighbours bought the house a few days ago, just to tear it down.
At the centre of the saga is the 61-year-old Ms. Halterman, who has chaotic blond-grey hair, a smoky voice and an open manner both gruff and sweet. She grew up here, working at times as a farm hand, secretary, long-haul truck driver and nurse’s aide.
In time, the container of vodka-and-grapefruit she long carried in her purse got the better of her. “Hard liquor was my downfall,” she says.