Down the Up Escalator

by Barbara Garson

  “And see, here’s the thing with my mother, she has that business spirit of reckless optimism. She’d talk a little about her real estate but never let us know how much in trouble she was. But I should have guessed.

  “She was always asking us to send her recruits, people she might be able to sell these loans to. I had never actually seen my mom pitch until I took her to some friends who were interested in buying a house. That’s when I realized that her big market was subprime loans. So I started to send her copies of the show.” One of Zita’s part-time jobs was as technical producer for Beneath the Surface, an L.A. radio show that, at the height of the boom, featured guests who discussed the real estate crash to come. “I’m sending her articles like, ‘This Can’t Last,’ ‘You Have to Get Out.’ And she’s like, ‘Yes, you’re right, but we’ll hold on one more year because the prices are still going up.’

  “I felt like Cassandra: I’m looking right at the iceberg”—Greek mythology isn’t Zita’s specialty—“but no one will listen to me. I wasn’t exactly listening to myself, either, because I thought I’d have time to move out at the end of the school year.

  “So my mother’s assuring me that everything is fine, and one day a few days before finals week for the winter quarter of 2008, I come home one day and I see a notice on my door. Everything on the premises must be removed in ten days. I took a picture of the sign. What I remember was like, ‘This property is foreclosed and will be put up for auction on this date. You must vacate the premises by then.’

  “So I’m,” Zita says, giggling, “freaking out. Not only do I have to pack up a two-bedroom house in ten days and find a place to go, but it’s happening during finals week. Wow, thanks, Mom, for telling me.”

  “So you and your mother didn’t own the house together?” I try to get it straight. “I mean, you never got any of the earlier notices about falling behind on the payments?”

  “No, we didn’t own the house together, and no, I never got any notices, and I never got any financial help with school. But I did get cheap rent. A two-bedroom house for whatever I could pay. Sometimes that was as little as $400 a month. So absolutely, living in my mother’s house was a leg up, a subsidy that allowed me to go to school full-time. I only had to earn living expenses. I guess the thing that made me angry with my mother is that she didn’t say anything. She never told me she was in trouble. And then I get that notice—ten days!”

  A federal regulation passed in 2009 grants paid-up tenants ninety days’ notice to move out, but Zita didn’t even think of consulting a lawyer. This college-educated anti-authoritarian complied immediately with an official-looking notice tacked on her door and moved out during finals week. With the help of a couple of extensions she got through the term with her usual high grades.

  “And your parents,” I asked, “how did they make it through their second American recession? Emotionally, I mean—two educated people who moved from Southeast Asia to California for economic opportunity, but they wind up living in a trailer in Las Vegas?”

  “The first recession had the worse effect on my father,” Zita says. “He was used to being able to provide for the family. But after a couple of unsuccessful business efforts, he took early retirement. I’m the youngest, so I had to go off on my own during a time when he had lost his job and his house. It wasn’t how he expected to send me out into life.”

  She thinks a bit more about her parents. “My father has the peasant mentality—focused on security, though he supports my mother in everything she does. But my mother is the real Horatio Alger type. Right now she’s talking about getting into short sales. That means helping people get out of the houses you loaned them the money to get into.”

  “Short sale” was, for a time, the catchphrase and great hope for cleaning up the mortgage mess. But negotiations with banks usually got so complicated that the potential buyer often vanished before the sale came off. It takes a skilled and patient real estate broker to consummate a short sale.

  “I guess you could say my mom is looking for ways to make up her own losses by cleaning off the bones of other people’s wrecks.”

  “She sounds amazingly flexible,” I said.

  “She really is. And I love her to death. She’s my mom. But she’s like a lot of people who buy into the spirit of capitalism but don’t have the capital. She’s always looking for the big chance. But she’s not from the class that will hear about the next pyramid scheme toward the beginning. She’ll never be ‘inside’ enough to get out in time.”

  “But she’s still geared up for the next big thing?” I asked.

  “Oh yeah,” Zita answered. “My mom is …” Her pause implied unstoppable. “You’ll just have to meet her.”

  It’s a quick trip from Las Vegas to Burbank: the San Antonios visit their daughters there often. Zita arranged for me to meet her parents at her married sister Korina’s house. She, Zita, would join us after her last class.

  Bibi San Antonio is a small, erect woman who gives herself an extra inch of height with a perky hairdo like that of her heroine, Corazon Aquino. But Bibi doesn’t need that inch to make a big impression.

  I don’t know of any orthography that will catch the way she can pipe three musical tones into a single syllable to express derision, surprise, and most of all amusement. I’ll try using italics, but remember that while Zita’s mother could be adamant, she was never loud or shrill.

  “You write shorthand,” Mrs. San Antonio said approvingly as we got started.

  “But I can never read it back.”

  She laughed and told me how she’d won a full scholarship to the Philippine government’s prestigious commercial high school. “At that time most business was in the hands of foreigners. The president wanted to train Filipinos to run companies. That’s how I learned accounting, salesmanship, public relations. That president was assassinated.

  “What is it that you want?” Mrs. San Antonio asked in her straightforward way.

  “I want to tell people how it felt to be selling houses in California in those days when everyone thought things would just keep going up.”

  “Everyone but Zita,” her mother reminded me. “She kept warning me. But I didn’t think it was going to happen so soon.” She takes a brief pause for regret. “Anyway, I was not selling houses. I was selling loans. Mortgage loans. And the houses were in Nevada. In 2003 to 2005, that’s when I made a lot of money.

  “I started as a loan officer in Las Vegas, but most of my clients were in California. I have friends from San Diego to San Francisco. I don’t do cold calls, and I don’t mail letters. What happens with me is once I work with a client, they’re happy and I get referrals. That’s because I empathize and I analyze their situation.”

  Bibi explained that there were “a myriad” of loan options and it was sometimes necessary to insist that her boss make the lender (the bank at the other end of the phone) offer a specific loan to a particular client. “It’s not just a matter of ‘You want a loan, I give you a loan.’ No. Because if I give you the wrong loan, you suffer.”

  “Okay,” I say, hoping she’ll get specific. “Let’s say I’ve seen a house that I want to live in.”

  “That’s just one type loan, the buy-a-house-to-live-in. There are myriads of programs for that but …”

  Buying a house to live in wasn’t her interest, I could see, so I tried another scenario. “Let’s say in 2001 I have a house in Richmond, California, that’s worth $300,000 and I want to give each of my two children down payments to buy houses in the neighborhood.”

  “But what is your plan?” Bibi asks me. “Who is going to pay the loan back? Maybe I shouldn’t give you the loan.”

  “Did you often turn people down?”

  “Yes, many times. Because to make money, you have to hold this house for five years. Are you sure, just in case you lose your income, you can keep to a five-year plan?”

  “Okay,” I ask. “What is a good plan? What should I ask you for?”

  “The best exam
ple: a lot of people owned homes in California, and the homes are valued very high. Let’s say you own a house here. Your house is now valued at 1 million. Or let’s say $500,000. All you need is to get $100,000 cash money to make a down payment on another house. You’ll rent that out and hold it for two or five years, then sell it and make money.

  “In other words”—Bibi’s eyes are coming alive—“if you had a home that you lived in for several years and you only have $100,000 mortgage left on it, suddenly it’s worth $500,000. What are you going to do with that $400,000?

  “Ah”—her voice mellows as she answers her own question—“let us buy houses in Las Vegas and then let them appreciate for three or five years and then sell. That was the big thing, the big thing. There were other purposes for loans, but that was mostly what my people were thinking.

  “Refinance your home in California and then buy a house in Las Vegas. So now you have your house with a $300,000 mortgage and you own two houses, right?”

  “Right,” I say, suddenly realizing that this is classic speculation. “Did you sell mostly in the Filipino community?”

  “Yes, a lot of medical people, doctors, nurses.”

  “Did you bring people together like at Tupperware parties?” I ask.

  “No.” Bibi is almost offended. “No, it was always individually, always around a dining room table like this. Every situation is different, personal. If you’re nearing retirement, can you afford to hold a mortgage for twenty years? If you’re young, is your income steady? Nurses, will they remain here, or will they go back?

  “The point was to put all the money you can into mortgages instead of putting your hard-earned money into the savings account. What were you getting, 1.7 percent? The appreciation thing is far better than the bank.

  “But each person’s life situation is different. You’d be surprised. That’s why I got a lot of referrals because I really do diligent work. But how did it fall out?” I was amazed when Bibi brought that question up herself. “How did it all fall out?”

  “That’s what everyone’s asking,” I said.

  “Please don’t blame people in your book,” Bibi appeals to me. “Don’t blame people for buying houses they couldn’t afford. Well, maybe there are those. But if you really examine the matter, people bought the houses in Las Vegas because there was a plan, a plan to take care of themselves. Now, how did the plan fall apart?”

  I shrug, eager to hear her explanation.

  “Remember,” Bibi says, “it was a five-year plan. But none of us knew what Wall Street was doing. We thought it was going to be the way it was. The way it was all those years. You know, your house appreciates and then …

  “Remember, those loans were given by mortgage companies like, let’s say, Bank of America or Wells Fargo. But those banks got money from Goldman Sachs, and Goldman Sachs got money by betting against the houses. I told you there were myriads of loan programs. By the end they were concocting loans just to sell to investors, loans that they knew would make the clients fail. Then companies like AIG, they took our loans and …”

  Bibi San Antonio is a keen observer of the world in front of her eyes, but Goldman Sachs and AIG conduct their business above her eye level. She seemed to realize that she didn’t know exactly what the Wall Street banks did with the mortgages she wrote, or how exactly they caused the crash. So she returned to the world she knew.

  “We were working on the appreciation of the value and suddenly … If the value had just stopped growing, we would have been okay. But it fell, so everybody is upside down. But nobody knew it was coming.”

  “Except Zita,” I reminded her.

  “Yes, yes, my daughter. She is a genius. She is the only person that told me, ‘Mom, don’t do that, because it’s going to fall apart.’ I said, ‘Well, maybe it will fall apart, but after five years.’

  “I was working in a five-year plan myself, because I was making a lot of money, and money was accumulated in our house. And you can’t just put your hard-earned money into the bank. So we bought houses too.”

  “That shows you were an honest salesperson,” I said.

  “Yes, we had the same plan that we sold to others. Would you believe that a house I bought for 260,000 is sold for 90,000?

  “One house that I lived in for a while in Las Vegas, I was able to sell it on a short sale. Two other houses, they were going to be short sales, but they were foreclosed because …” She begins to mumble, and I catch “mortgage company,” “try to negotiate,” “lower the balance.” Bibi then decides to forget the frustrating details and just give the final score.

  “Anyway, it’s short sale one, foreclose two, but not the house in Burbank. That’s the one I was able to save.”

  “Burbank?!”

  “It’s only nine hundred square feet, $390,000. I only bought one in California because it’s expensive. But one good thing about me, when I bought a house, I always put down 20 percent, so in the end …”

  Zita’s mother saved the Burbank house?! Wait a minute. This started when I met a student who had to move during finals week because the house she was renting from her mother was foreclosed. But her mother says she still owns it. As I was about to delve into the Burbank mystery, Korina’s husband, John, arrived home from work with sausages to grill. Zita came through the door shortly after.

  “Your mother called you a genius,” I said in greeting her. “I bet she never says it to your face.”

  “Yes she does.” Mother and daughter hugged, and Zita went scavenging in the refrigerator for ready food. At no signal that I heard, Mr. San Antonio emerged from the den, and the family gathered around the table. The soup was lovely. Korina grows vegetables in the yard. She was trying to show her parents that food can taste good without a lot of salt. Bibi had had two strokes, I was surprised to hear.

  “They eat what I send home with them,” Korina said. “But in Las Vegas there’s all the $3.99 buffets. And of course it’s a sin to waste food,” she chided her parents. “So if you take it, you have to eat it all.”

  As the table was being cleared, I found myself alone with Bibi again and asked immediately about the Burbank foreclosure.

  “That was Indy Bank—I’m sorry, sometimes my memory—I mean IndyMac.” (Bibi makes fewer word slips than most people I interview. Imagine her before the strokes.)

  “When your payment is up-to-date, when you don’t have a delinquency, they will not negotiate a mortgage modification. If you stop your payment, then after three months, or six months, depends, they will start negotiating.”

  So Bibi stopped payments to get negotiations going.

  “I wanted them to lower the principal; they only asked, ‘How much can you pay?’ ”

  “But wait,” I said, “Zita got an eviction notice.”

  “I was negotiating with them, and it’s part of the process that they will give you the default notice. Maybe sometimes a possibly improper foreclosure is done too.” Bibi uttered this last bit about improper foreclosures as a throwaway line and went on describing her useless negotiations with IndyMac in some detail. Then finally she said: “We were not getting anywhere, and I was ready to let it go. But right then IndyMac went bankrupt, and the FDIC [Federal Deposit Insurance Corporation] took over. The FDIC was good, very good, because of that lady … Yes, Sheila Bair.”

  Sheila Bair, a Republican who first came to Washington as legal counsel on Kansas senator Bob Dole’s staff, was appointed head of the FDIC in 2006 by George Bush. As early as 2001, Bair warned about a possible wave of defaults when adjustable rate mortgages reset. She tried unsuccessfully to get the most dangerous and abusive mortgage terms modified even before the crash.

  In the run-up to the financial crisis, IndyMac and several other banks went bankrupt and were taken over by the FDIC in accordance with normal, well-established practices for resolving the affairs of insolvent banks.

  Bibi described how the FDIC, under Bair’s leadership, temporarily stopped the adverse procedures and sent professionals
to assess her financial situation and negotiate a deal. They didn’t grant the principal reduction she wanted, but they set a monthly payment she could meet by renting the house. “Twelve hundred dollars they wanted—it comes to $1,500 with insurance and property tax.”

  “Wait, the Burbank house is now rented? You own it and rent it out?”

  Bibi told me with some pride how, rejecting agents, she herself located a tenant eager to use the good local schools. “I asked $1,900; my expenses are $1,500; I let her bargain it down to $1,800. They’re good tenants. All I ask her is to take care of the yard. I used to pay this young man $65 just to take care of the small front yard.”

  Didn’t Mrs. San Antonio understand what her genius daughter went through when she was foreclosed during finals week? Didn’t Zita ever ask her mother if she really had to move out in ten days?

  “So I make a family happy, and the payments are covered. I told my kids I’ll hold on to the Burbank house till whatever my husband and I decide. But right now it’s cleaner to live in Las Vegas.”

  What kind of Rashomon story is this? Zita races to empty a two-bedroom house and find a new place during finals week of her first year at the university. But in her mother’s account the “possibly improper” foreclosure notice is only a footnote. I wanted to get this mother and daughter together. But before Zita returned, Mrs. San Antonio excused herself to join the men. “My Lakers are playing.”

  But I asked about the Burbank house when I got the two sisters alone.

  “As soon as the FDIC took over, they stopped all foreclosures.” That’s Korina’s first recollection.

  “You’re sure you really had to move?” I ask Zita.

  “Yes. Remember that last day we ripped out all the fixtures?”

  Her sister doesn’t contradict that detail. It’s just that her focus was on their mother’s struggle to bargain with the bank.

  “She was still in the midst of negotiating,” Korina says, recalling her mother’s frustrations. “She talked to some rep who didn’t even know that a foreclosure notice had been sent.”