Have you ever wondered how America got into this home mortgage meltdown mess? Have you ever wondered what those giant mortgage originators were thinking of when they invented interest only home loans with no income proof required and then were shocked when it blew up in their faces? Adam Michaelson recently wrote a book called, “The Foreclosure of America: The Inside Story of the Rise and Fall of Countrywide Home Loans, the Mortgage Crisis, and the Default of the American Dream“.
In July 2004, the author who was the Senior Vice President of Marketing for Countrywide Home Loans entered into an underground bunker at Countrywide’s headquarters for a meeting about a new loan product that would allow borrowers to pay less than their minimum monthly payment. Michaelson asserted in the book that he witnessed the invention of interest only mortgages and “pay option” mortgages where people could choose their own low payment (lower than the monthly principle and interest required) which would he feared correctly would bring down the American Dream of home ownership. It’s pretty easy to accurately predict a major meltdown in hindsight. Michaelson stated in the book that he brought his fears up to his bosses and was ignored. But, in the end, he proved to be the good corporate soldier by marketing and helping to sell millions of Americans on the idea that they could buy more house then they could afford and to pay less for it as well. The booming housing market would only get bigger, of course, with increasing home values supporting homeowners in a never-ending cycle of borrowing against the value of their inflated home equities and refinancing at a later date until those values ultimately plummeted.
The book gives us an incredible insider’s knowledge on the ripple effects the mortgage meltdown had on American families and the economy. The book examines the morality of a career spent marketing mostly unattainable dreams and the market forces that destroyed a company. The book is a fascinating look at the motivation, politics, and inner workings of Countrywide from someone who was actually on the inside.
While this book is only one man’s view of one institution’s role in our current recession and the mortgage meltdown specifically, it is a great look inside the company that started all of this mess. I always find these inside, behind the scenes look in companies and institutions fascinating, and I think that you will as well.