By Christian Hudson
Originally published in the Santa Cruz Sentinel: 03/09/2008
Wall Street and Capitol Hill are in danger of developing a Halle Berry complex when it comes to the mortgage mess.
It has to do with illusion.
A number of years ago I bought a then-neglected row house in Washington, D.C. By that I mean when I pulled out the carpet, and the carpet under that carpet, I also pulled out drug paraphernalia. But the house's solid bones, proximity to school and work, plus the neighborhood's architecture and friendly vibe made it a score.
One day while out front landscaping, I spied what looked to be Halle Berry and a sidekick coming up my block! [OK, so clearly not Halle Berry, but her stunt double.]
Stunning, beautiful and gorgeous, she was everything you'd expect from her if she walked out of a James Bond film and onto your stoop.
She had lots of questions: Do I own? What's my loan rate? Then the sell: I can lower my monthly payment if I refinance and restructure. She then complimented me on my house [Is Halle flirting with me?] At this moment, I can't decide who feels prettier: me or my house.
Then the conversation came to a screeching halt. I explained that I liked my 30-year mortgage. She demanded to know why I wouldn't want to pay less. I explained that consistency is better because I'm staying in the neighborhood and not flipping the house for a short-term gain. Besides, I said, the market can't continue to grow at this rate.
"That's stupid," she said. And she continued on to the next house. Wow. Halle Berry's doppelganger just called me stupid. I smiled and laughed to myself. But when I watched her go door to door, the smile disappeared. My neighborhood is diverse in age, professions, economics and racial backgrounds. I love that about my neighborhood.
My ears were deaf to her pitch. At the time I was a journalist, the son of a real-estate appraiser, and a law student. Her next pitch was as likely to fall on an attorney, as it was on a retiree who lived through the neighborhood's hard times of the 1980s crack epidemic.
It is not unlike the stories out in California. Is the guy who only speaks Spanish and relies on the bilingual mortgage broker or lender the same as the woman who can read the contract in English herself?
Right now, both Wall Street and Capitol Hill are painting solutions to the mortgage mess with Black and Decker-sized brush strokes.
But it seems to me that the person who was flipping properties, or buying a second piece of real estate as an investment is much different than my retired neighbor or someone new to the country relying on a broker's language skills.
That's why I think about Halle Berry every time I hear about the subprime mortgage mess. The danger is taking a square peg and jamming it into a round hole. Not every case is the same. Some will read this and conclude it's another example of mortgage holders as victims, while others will point to me as an example of affirmative choice.
Consider the trial balloons currently floating around town: some have Uncle Sam buying up the delinquent mortgages through a government agency or quasi government agencies, others would send mortgage cases before a bankruptcy judge, and still another would push banks to change the mortgage payment in return for a stake in the principal when the house is eventually sold -- a plan that received a boost by Federal Reserve Board Chairman Ben Bernanke in a speech on Tuesday.
The debate about these plans mostly centers around who picks up the tab -- the taxpayer or the market. What we shouldn't lose sight of is whether we are doing a good job of separating real victims from those who knowingly chose to gamble.
Christian Hudson is Santa Cruz local and a former CNN Senior Producer now practicing finance and real estate law at Hunton and Williams LLP in Washington, D.C.
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