After reading this AP article on some of the victims of the subprime loan industry's poor judgment, I've about concluded that, of all the different volunteer opportunities I'm considering doing in retirement, the single most socially useful thing I can do is teach basic financial literacy through Operation Hope. The people who were suckered into these loans did things I've known were stupid since I was about fourteen - like, signing blank loan applications and returning them to the mortgage broker. Some of the people interviewed for the article didn't see the applications again until after they had signed up for loans - at which time they discovered they were credited on the loan applications with income they didn't have, jobs they didn't have, and assets they didn't have. These people have now lost what little they did have, and ruined what credit they had, to boot.
[Ed. note:] Checking back on this post 10 years later, I find that the link to an AP article in the first paragraph is no longer valid. This 2007 article in the Washington Post covers the same incident: Neighborhood Swayed by 'Liar's Loans'
The other characteristic of the group covered in the article that left a very nasty taste in my mouth was the fact that the loan brokers who screwed over this particular group of people, mostly low-income women in Boston, operated out of the basement of the Victory Chapel Church. I don't recall the article noting that they made any particular point about being associated with the church; but I'm quite sure that the people in the neighborhood assumed that, if the church rented the basement to them, they must be OK.
Speaking of basic financial literacy, let me remind us all about the word "assume" - it's the word that "makes an ass out of u and me".
The Victory Chapel Church isn't the first religious institution that has been used as the operating base for a scam artist, by any means. In the early eighties, a firm called Lendvest operated out of Napa, California (my home town), and eventually became the center of a massive scandal surrounding bankruptcies and unsecured loans, as well as drug trafficking and at least one suspected murder. All this data is from a very brief Google search, I haven't researched it in detail, and I wasn't living in Napa at the time. However, some of the neighbors I grew up with in Napa lost a large portion of their life savings in the Lendvest mess, and my recollection is that they bought into it because their contact at Lendvest was a member of their church and a "good man." Of course, they also bought into it because it was promising ridiculously high rates of return.
Speaking of basic financial literacy again, they forgot the basic TANSTAAFL principle: There Ain't No Such Thing As A Free Lunch.
To put it another way, the world is not full of people standing around waiting to give you money out of the goodness of their hearts. If it looks too good to be true, you have to assume it is too good to be true. The people pushing the loans discussed in the AP article were falsifying loan documents in order to make big transaction fees on high interest subprime mortgages; the fact that the borrowers were going to lose their shirts in about 18 months when the loan rates adjusted was irrelevant to them. Frankly, I hope they all go to jail.