ScoreCard Research The American Nightmare: Subprime Mortgage Crisis, 10 Years Later - The Penny Hoarder

Chapter 1

When Housing Market Crashed, Lives Collapsed

Heather and Rick Little learned in court that they would have to leave their home by Dec. 10 — just two weeks before Christmas.

The Littles knew the foreclosure was coming before the October 2008 hearing.

The bank was relentless with calls and notices and big fat envelopes, Heather remembers. She called and begged for help, but there was nothing the bank could do. “Nothing they would do,” she said.

She stopped trying to stall the foreclosure.

The day of the hearing, the Littles wheeled their daughter, Emma, then 19 months old, into the Manatee County, Florida, courthouse in her stroller. Their son, John, was in kindergarten that day.

The judge was sympathetic, Heather recalls. He asked them how much time they needed to pack up and move. The hearing took less than 15 minutes.

“There was no one around, thankfully,” she said, “because I fell apart.”

Their house became one of the 9 million homes that would go into foreclosure nationwide between 2007 and 2010.

The Littles went from hosting barbecues in their backyard with a swimming pool and outdoor kitchen to taking whatever they could get from local food banks.

A decade after the height of the Great Recession in 2008, people who lost homes and careers are still recovering.

For the Littles, life is more stable now, but the swimming pool and outdoor kitchen are long gone.

Today, the family’s backyard holds plastic pots where Heather grows fruits and vegetables — signs she still remembers what it felt like to question where their next meal would come from.

“We had nothing extra at the end of every month,” Heather said of the years after their foreclosure. “Nothing. Not even a dollar.”


The Littles’ four-bedroom house in Bradenton, Florida, was supposed to be a pit stop along the way to their waterfront dream home.

At 2,800 square feet, the newly built house dwarfed the 980-square-foot cottage they sold for a $100,000 profit in 2004.

The booming residential construction industry fueled their dream. The Littles owned a company that poured concrete and installed beams for new homes. Before the recession, they had so much business that they had to turn much of it away.

But in 2006, they learned the company that managed their payroll taxes had stolen their money.

The owner of the payroll company was sentenced to 48 months in federal prison. The Littles were left with $180,000 in back taxes and fees for attorneys.

In June 2006, they took a trip they’d prepaid for to the Florida Keys, suspecting it would be their last vacation for a long time. The day they returned, Heather learned she was pregnant with Emma.

Right after that vacation, the Littles noticed something odd: Suddenly, they were no longer turning away business. Instead of the usual four houses a week, they’d have three.

They’d taken everything out of their savings accounts, retirement and life insurance policy to pay their tax debt.

Their home’s value had risen more than $40,000 in the two years since they bought it. That meant they could refinance and take the equity to put toward their taxes.

So in December 2006, they turned to their mortgage for help.

Their old monthly mortgage payment was $2,500. Their new payment: $4,500.

“We had a feeling we were going to be in a position where we wouldn’t be able to swing that if anything happened,” Heather said. “But we didn’t have a choice. We needed to pay back the IRS.”

By February 2007, their client base had dried up completely. Construction firms were undercutting one another, taking jobs that once paid $2,800 for just $800.

“We became completely destitute in a matter of six months,” Heather said.

Heather Little gives her husband, Rick, a kiss after he gets home from work. The Little family lives in a rented home in Palmetto, Fla. Heather works as a Radiological Technologist, and Rick works for a neighboring county government.
Photo by Tina Russell / THE PENNY HOARDER

Before 2006, the Littles didn’t even carry a credit card balance from month to month. They weren’t the high-risk subprime borrowers often blamed for the housing market’s downfall.

But the construction boom that fueled their lifestyle was driven by risky loans and easy access to credit.

Traditionally, when you wanted to get a mortgage, the bank made sure you were creditworthy because it kept the loan in its portfolio.

But in the mid-1980s, big banks started buying mortgages from the smaller banks that issued them. They’d package them with other mortgages in bundles known as mortgage-backed securities. Then, they’d sell parts of those packages to other banks.

Banks started relaxing their standards so they could make new loans.