'Where Do You Go From Here?'

Nov. 20, 2007— -- Edward Jordan should be sitting on a goldmine. Thirty years ago, when others saw poverty and crime in the Bedford Stuyvesant section of Brooklyn, N.Y., he saw opportunity. He bought a four-story brownstone at auction for $30,000; since then, he says, property rates have gone "through the roof."

Jordan should be set for life, with his investment now appraised at $750,000. Instead, he's holding a financial time bomb that threatens his golden years and his only economic asset.

"It means everything; it's a lifetime invested here," Jordan said. "And of course, if I go down, it's a nightmare. Where do you go from here? I'm a 79-year-old man."

Earlier this year, Jordan refinanced his mortgage, looking to pay off some credit card debt. With excellent credit, he thought he might improve on his fixed rate loan. A broker offered him a subprime mortgage with a very low starter rate — and you know what they say about things that sound too good to be true.

"Things I was told wasn't true," Jordan said. "I was told it would be 1 percent for five years, and it ballooned after about six weeks. It went to 8.75 percent, so that 1 percent was just, it was too good to be true, and it wasn't true, and I was caught, and it was too late."

It's known as a teaser rate. Jordan calls it a swindle. In the collapsing credit market, Jordan's mortgage misstep is a textbook case of what's gone wrong.

That 1 percent teaser rate lasted only 45 days. Before Jordan even made his first payment, the rate had skyrocketed to 8.75 percent. And the loan came with monthly payment options, but the only payment he could afford didn't even cover the interest, so his principal balance increased every month.

Jordan's lawyer, Meghan Faux, said even though she's been looking at loans for years, it took her a full day to figure out Jordan's mortgage.

"It keeps growing. Within the matter of a couple of months, it increased several thousand dollars," Faux said. "When his principal reaches 110 percent of his original principal balance, he no longer has the option to make the minimum payments, and his payments will increase to well over $3,000 a month, which exceeds his whole household income. He is on the fast track to foreclosure."