Yesterday it occurred to me that my family actually bought a house during the crisis, sometime around May 2008. (We don’t actually live in that house anymore.) I was around twelve when we moved into that house, and I don’t recall ever hearing about financial difficulties within our family or struggles regarding the house; we actually made a number of improvements to the house, painting it, putting new floors in, new counters, etc. I don’t think I even knew there was an economic crisis going on. Thinking about it today, I wondered why my family was so unaffected by the crisis, so I called my dad to ask him about it.
One of the first things my dad said was that he wouldn’t get himself into a bad deal. When I asked about the mortgage, my dad brought up adjustable loan rates, which Michael Lewis in The Big Short pointed out as a major factor in people being unable to repay their loans. Rather than facing a ‘teaser rate’, as Lewis called it, my dad had a fixed rate loan on the house. My dad said, “You’re just a gambler if you [take out an adjustable loan].”
Of course, my dad has the advantage of an education, having a graduate degree in math, and having English as his first language. There wasn’t the possibility of him being tricked like the woman interviewed in Inside Job who spoke Spanish and practically no English. And as Lewis would put it, a buyer like my dad isn’t someone the banks were looking to “harvest.” My dad also mentioned he took out his loans through the government, which I thought was interesting. I don’t know anything about federal loans, but from what I read in The Big Short, it seemed like all the bad mortgage loans were coming from the banks themselves.
Another thing my dad brought up is that he has a credit score of 800 and has never had more than very small credit cards debts. This is another difference between my dad and the people being given bad loans; Lewis points out that many people also seemed to have good credit scores, but that they were “thin-file” scores because they hadn’t actually bought much of anything. My dad’s score actually has a history behind it.
My dad worked as an actuary in the nineties, which entails, as he put it, “taking the past to project into the future” regarding insurance rates. (I’ve probably asked my dad dozens of times what an actuary does and I still don’t really understand.) I asked him if being an actuary exposed him in some way to the financial crisis, but he said that the only way he knew anything was happening was through the news. Nobody in his circle of friends and family seemed to be effected either. My dad works as a teacher now, and I asked if being a teacher helped shield him against the crisis. He agreed, because “teaching is a stable profession” and “people’s taxes pay for my salary.” Besides already being tenured when the crisis happened, his position is protected by a union and teachers don’t really have to worry about cuts (at least in his district) because taxes are always coming in. My dad also pointed out that we were upsizing from our previous house, and had sold it for more than we bought it for. So, in conclusion, all these factors combined to keep the Gears family relatively stable during the financial crisis.