09 October 2008


The Cincinnati Business Courier reports today, that Coldstream Financial has closed.

Here is an excerpt of the article:
...The firm grew quickly during its five-year history, earning the Business Courier’s Fast 55 designation in 2005 and 2006. According to Courier research, it closed 3,076 loans worth $486 million in 2006, with an average loan size of $158,000. Last year, volume dropped to 1,732 loans worth $302 million.

...“There is a lot of finger-pointing to brokers for the downfall, for the easy mortgages,” ...
I had an close call with this firm a few years ago that is very relevant to the current financial crisis. I think it is worth putting my story out there, so as to put a real face to the current epidemic in foreclosures

A few years ago, we had significant credit card debt. I don't want to explain how we came into this debt, but be assured it was not the result of extravagant living at all. However, the debt was more than a year's salary, and we were unable to pay it off. The minimum payments alone were killing us.

So one day in early 2005, I was at a Home and Garden Show and I came upon a Coldstream Financial booth. I talked with a very young guy in a suit who was advocating that people refinance their mortgages to finance home improvement projects. He suggested that I could pay off this credit card debt through a refinance.

I visited their offices in Sharonville/Tri-County. They had a fancy office with glass walled meeting rooms and they were willing to meet after 5pm to accommodate my schedule. They laid out a potential re-finance, but with higher interest rates than what I currently had. In order to make the payment reasonable they extended the term. They sent our an appraiser. The appraiser did not feel the property was worth the increased value, and said so.

I thought that would be the end of story with them.

However, they kept calling saying they could still work something out. So I went back into their offices, and they laid out another proposal for me to refinance through another lender. The payments would be based on a 30 year loan, but the loan was only for 2 years!. I asked what would happen at the end of the two years, and their response was "we'll just re-finance again". But the real shocker was when the woman in charge, Barb told me that they didn't need an appraisal at all. At that point it smelled way too fishy, and I walked. They continued to pursue me for a year or so, but by then my wife and I decided to just buckle down and start paying the credit cards down directly.

It may be hard to imagine now, but at the time, I had never heard of a sub-prime mortgage. I didn't really even realize what a mortgage broker was. But if I had signed the loan papers, I would now be without a home.

The owners of Coldstream Financial, and many of their managers made lots of money. On the proposal they had for me, they were proposing to take a $20,000 fee! And they did it by getting people to borrow more than they could possibly ever pay back.

Now I am reading articles that are blaming the sub-prime mess on the CRA, or on Bill Clinton, or on Fannie Mae. But from my personal experience this was not heart of the problem. It was ignorance and greed. Ignorance and imprudent decisions by homebuyers, and greed of the lending industry. And the funny thing is their greed paid off ...for them.

Fortunately I wasn't quite desperate or dumb enough to fall for the trap, and it looks like sometime next year we will make our final credit card payment. But many others were not so fortunate...

UPDATE: This article has statistics to back my story. Private Sector sub-prime loans, not Fannie and Freddie, or the CRA are the main source of this collapse.

UPDATE 2: Here is another article disputing the claim that lending to poor black people caused this crisis.


Radarman said...


Mark Miller said...

None of us will be debt-free any time soon.

The boneheads who are supposed to represent us just bailed out those POS lenders with roughly a trillion dollars of our money. That's over three grand for every man, woman and child in America.

When the economy goes to hell and you think things can't get any worse, the damned politicians heap insult upon injury by robbing the victims in order to payoff the criminals.

5chw4r7z said...

You know a couple years ago, I asked around, feeling stupid, what the hell was the business plan loaning money to people who couldn't repay it and a few people acted like I was an idiot.
All of my questions have now been answered.
But now I know why, they were spending other peoples money and raking in huge commissions, so what did they care people lives were being ruined?

CityKin said...

Debt, both national and individual is a symptom of a greater illness.