The ongoing collapse of the subprime loan scheme has been widely reported, including stories about millions of foreclosures, billions of dollars in losses, and even a couple of Wall Street CEOs getting the boot. Little attention, however, has been paid to one group of Americans who had no role in the scam -- yet now find themselves homeless as a result of it: renters.
All across the country, landlords took out big loans with adjustable interest rates to build apartments -- especially in low-income areas. When interest rates zoomed up, landlords began defaulting on these loans, and renters were suddenly getting eviction notices from faraway corporate strangers. Unbeknownst to tenants, the landlord's mortgage was sold by his local lender to some investment pool created by a Wall Street bank, which resold the loan to faceless investors.
When the landlord defaults, the new owners of the apartment complex are the investors, living in places like Hong Kong, Hollywood and Go-To-Hell, Texas. These are not people who're going to deal with your plumbing problems, so the investment pool serves its profit interest by putting the property up for sale, abrogating leases, and tossing out the tenants -- on the theory that vacant buildings are easier to sell.
When Ponzi schemes like this are on the rise, the money flows to the top. When they collapse, the trouble rushes to the bottom. Rep. Barney Frank plans to introduce federal legislation to help renters who are finding the subprime loan scam crashing down on them. For more information, call Frank's office: 202-225-5931.