Subprime Crybabies

Last night, ABC News lavished sympathy on a North Carolina couple whose mortgage payments had risen to just over $2,000 a month, owing to the fact that they had an adjustable rate mortgage whose interest had recently risen from an introductory 9 percent rate to a hefty 14 percent rate.

Math is obviously not something that ABC News journalists understand. The ABC evening news program hosted by Charles Gibson credulously accepted the couple’s claim that they were being forced to devote the lion’s share of their income to their mortgage payments, even though ABC reported that the couple’s annual income was $80,000 — or about $7,000 per month.

How do you go broke paying $2,000 in mortgage payments on wages of $7,000 per month? I suspect the real reason they had difficulty paying their mortgage was the same reason they presumably had a high interest rate on their mortgage in the first place — high credit card and other debt resulting from personal irresponsibility. (My mortgage interest rate is 5 percent, because I have excellent credit. Only a rotten credit history, or a complete failure to shop around for the best interest rate, could have led to me paying a 9 percent interest rate).

Yet ABC News depicted them as victims of predatory lending.

It’s quite possible to make $2,000 a month mortgage payments on a $7,000 a month salary if you don’t have big credit card debts.

After ABC News started doing a story on the couple, their lender, terrified of bad publicity and demagoguery (given pressure by lawmakers to bailout subprime borrowers), cut their interest rate to less than 8 percent.

Since my wife recently quit her job to take care of our baby daughter, I will be paying a similar fraction of my income to pay for our mortgage. But you don’t see me demanding a bailout or complaining that I’m going broke paying for my mortgage.

And since I live in a high-living-cost area (near Washington, D.C.), my home is smaller than the North Carolina couple’s home, even though my mortgage was bigger than theirs. Like many subprime borrowers, they are lucky people, not victims, but ABC News was too clueless to see that.