There’s always something to howl about

The truth will set you free — but your chains are forged from sob stories . . .

I was at a party about 13 months ago, a going away party for one of my clients whose house we had just sold. I had sold the hostess her house, and somehow or another we started talking about 80/20 loans — nothing down financing. She had just refinanced to retire the second mortgage, so she had 20% equity in her home at next-to-nothing in out-of-pocket costs.

All around the room, people started nodding and saying 80/20, 80/20. They had all done the same thing, a room full of young homeowners with their homeownership made possible by the no-PMI piggy-back loan.

This is Peter Coy in Business Week’s Hot Property:

Is Your Mortgage Choking You?

For an article in BW, I’m looking to interview people who have subprime ARM mortgages and are feeling squeezed by resets.

A few weeks ago, Coy admitted that margins of error in statistical reporting render much of it meaningless. I have never worked with a sub-prime borrower, but I would expect that, among the stories of people being “choked,” there must also be stories of people who bought homes they would not otherwise have been able to purchase, homes they have subsequently refinanced with conforming loans.

“Proof by anecdote” is bogus in the first place, since anecdotes abound (and they’re much easier than real estate to improve). But surely there are countervailing anecdotes for almost any phenomenon. This might seem to argue for presenting “both sides” of the story. To me, it suggests a better approach. An anecdote in a news article is almost always a fallacious Appeal to Emotion dressed up as testimony. With two or three sad tales, the reporter implies that a situation that might be quite rare is in fact ubiquitous — and that the “solution” propounded requires no rational defense. Facts are facts, and surely thoughtful people can digest them without all that saccharine. Why not leave the anecdotes out altogether…?

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    3 Comments so far

    1. Holden Lewis February 26th, 2007 9:26 am

      We put in the anecdotes because people are interested in what other people do. Think about the news articles that you read. If you have a choice between a story in which the reporter interviews only experts about how a phenomenon affects ordinary people, or a story about the same subject in which the reporter interviews those ordinary people, you’re going to read the latter.

      If a reporter wrote an article that said that some people are “choked” by their choice of putting a piggyback on top of an option ARM, but didn’t quote anyone who was in that situation, you would say, “Why didn’t the reporter find someone who is affected?” But when a reporter finds someone who is so affected, you say, “A few anecdotes is insufficient proof.” Thus, you’ve set up a heads-I-win, tails-you-lose situation for the reporter.

      I prefer your all-sides-of-the-story solution: Have the reporter find anecdotes of people who are being squeezed, and also of people who are thankful that they escaped a crappy apartment and got a house in a better neighborhood, thanks to an 80-20 loan structure. I’m sure there are other sides to that story as well, not just two sides.

    2. Greg Swann February 26th, 2007 9:45 am

      Hmm… I understand everything you’re saying. And yet…

      Three anecdotes: ;)

      1. A weepy foreclosure story in El Mirage, AZ. The poor seller only came out with $67,000 after everyone was paid.

      2. A tender yarn about a couple in Paradise Valley, AZ, who had nothing left over after their mortgage payments — on their million-dollar home.

      3. A pair of schoolteachers who wanted to live in Tempe, AZ, but were forced by cruel fate to buy in Laveen, AZ, instead. A new-build. Four bedrooms, two baths with a swimming pool. On her credit and income alone.

      In each of these stories (I have many, many more), the sad half of the story comes from the newspaper. The happy half comes from the tax records. As much as I would like to see all sob stories — and all logical fallacies — purged from the public prints, this stuff is blogfodder unending.

      > If a reporter wrote an article that said that some people are “choked” by their choice of putting a piggyback on top of an option ARM, but didn’t quote anyone who was in that situation, you would say, “Why didn’t the reporter find someone who is affected?”

      This is an excellent point. Right now the Arizona Republic is campaigning for legislation to add extra criminal penalties for cash-back mortgage fraud scams. There have been many front-page articles about the widespread scandal of it all, but, so far, not a single indictment, arrest or even name named. I think the whole thing is tendentious — the purpose is to pass the legislation — but it remains that the sole “evidence” presented so far is one anecdote of a sleazy overture that did not result in a transaction.

      I am as guilty as anyone of lending color to my prose, but the beautiful thing about the world we live in now is that anyone can check anything.

      My best to you, Mr. Lewis. Don’t play games with pneumonia. The vaccine is only good for about ten years, and you might need it in your old age.

    3. Holden Lewis February 26th, 2007 11:24 am

      LOL! Thanks, my man! That pneumonia is a bee-yotch!

      And in a world where everyone can check anything, a thorough reporter is golden. So are bloggers who hold reporters accountable.