The media are quick to blame everyone – especially lenders – except borrowers for the subprime mortgage “crisis.” The March 9 “CBS Evening News” found another way to demonize home lenders instead of the borrower who took on an ill-planned mortgage that was more than he could pay.
“[Michael] Wiggins, a city bus driver, was one of millions of Americans caught in the subprime mortgage crisis,” CBS correspondent Randall Pinkston said. “His mortgage lenders’ network loan gave him an 11-percent interest rate with a payment of $3,900 a month. But that jumped to $4,200 a month because of delinquency fees and penalties. Knowing he was sinking fast, Wiggins looked for refinancing at commercial banks.”
Rather than place any blame on the borrower, who didn’t pay his bills on time and then couldn’t afford the extra fees, Pinkston suggested the color of Wiggins's skin may have dictated the type of mortgage the bank sold him.
“Some community bankers believe there is a racial component to the subprime mortgage crisis, a belief supported by the Federal Reserve report which shows that 55 percent of black borrowers versus 17 percent of whites were steered to subprime loans, even when they qualified for lower interest rates,” Pinkston said.
Pinkston didn’t provide any evidence that Wiggins’s bank steered him to a subprime mortgage, rather than one with a lower interest rate, based in any way on his skin color but did report Wiggins was able to refinance with another bank – Carver Federal Savings (NASDAQ:CARV). According to its Web site, Carver Federal Savings is “the largest African- and Caribbean-American operated bank in America.”
“But, one bank said yes, not a big institution with billions in assets, but a small one – Carver Federal Savings,” Pinkston said. “With Carver, Wiggins received a 7.5-percent interest rate, a $2,600 a month mortgage and a $3,500 line of credit.”
Hard-luck mortgage stories that suggest the borrower should be held responsible for taking on more than he or she could afford are few and far between. Instead, the media focus heavily on worst-case scenarios, using extreme situations to make businesses – in this case mortgage lenders – look bad.
The Business & Media Institute’s 2007 Special Report, “Debt: Who’$ Responsible,” found that network news shows overwhelmingly blamed business for “luring” consumers to make bad decisions and ignored personal responsibility as a factor in debt struggles.
Last week, the Mortgage Bankers Association (MBA) reported the rate of loans entering foreclosure in the last quarter of 2007 was 0.83 percent.
