The Military’s Subprime Mess
Here’s a particularly disturbing and often overlooked aspect of the subprime mess, courtesy of Bloomberg: Foreclosures in towns where soldiers live are increasing at a pace nearly four times the national average.
The story cites the sad case of an Air Force technical sergeant who left in April for his third tour in Iraq. When he returns, he’ll probably lose his home. His wife missed work when she was diagnosed with breast cancer, and the family fell behind on the payments for their four-bedroom farmhouse, near the Iowa State fairgrounds. Their mortgage went into default in December.
“We’ve never faced a situation like this, not in the Vietnam War, World War II, or the Korean War, where so many military are in danger of losing their homes,” said , executive director of , a Washington-based advocacy group started in 2002 by Iraq and Afghanistan War veterans. “No one asked them for their credit score when we asked them to fight for us.”
Another difference during this war is that lenders have the ability to communicate more with military personnel overseas. So while they are fighting in Iraq, they get emails and phone calls from lenders hassling them about their late mortgage payments.
As Bloomberg notes, military personnel were a particular target during the subprime boom. Because they move frequently, put in stints overseas, and earn modest salaries, their credit scores often aren’t stellar. And during the housing boom, subprime loans were heavily marketed to them as a cheaper and quicker way to get a mortgage than using a Veterans Administration loan.
Foreclosures aren’t the only problem here. For years, payday lenders and high-rate car dealers have clustered around military bases. They go after young people, away from home for the first time, who might not be particularly sophisticated about their finances. Military and consumer advocates have complained about this problem constantly, usually to no avail. Finally, the Pentagon stepped in to charge that payday lenders were undermining morale and hurting military families. Congress last October capped payday lending rates to military personnel at 36 percent.
If you think that stills seems ridiculously high, it is. But consider most payday lenders charge interest rates as high as 400 percent on a two-week loan. It’s fair to argue, in the subprime mess, that some borrowers were irresponsible, or lied about their incomes to get a loan, or bought houses they couldn’t afford. But it’s different when it comes to the military. For reasons I don’t understand, the scandalous targeting of the military by predatory lenders - something that has gone on in full force for nearly two decades - never has received the attention it deserves. If soldiers start losing their homes in high numbers, maybe it finally will.
But that still won’t answer the question of why everyone stood by while predatory lenders went after the nation’s military families.