WaPo: Struggles of the Richest Black Neighborhood in the Richest Black County (regular, Clinton)

[justtitans]

This was a 3 part series done by the Washington Post about a neighborhood in Bowie, MD known as Fairwood, which is the richest black neighborhood in Prince George's County, which is the 'wealthiest' (Census' measurement of wealth is based on income not assets) black county in the nation. I will post a couple of highlights to the articles, but what I want to know from you all is if you feel as though this type of occurrence is going to significantly impact the black middle class in the US in the future?

I also want to point out that there was legislation passed (or actually updated) during the time of the housing boom that relaxed the standards for individuals to qualify for mortgages in order to encourage more home ownership locally and to based the criteria on the demographics of the area that each area that was being served. As a result of the housing crisis much of these standards have been tightened and it has made it more challenging for minorities, particularly blacks to become homeowners. With that said, do you believe it is more beneficial for our nation to create more opportunities for minorities to own homes or do you think the standards should remain high at the risk of shutting out a large portion of potential minority homeowners?

The American Dream shatters in Prince George’s County | The Washington Post

The county became a national symbol of the American Dream with a black twist. Families moved into expansive new homes, with rolling lawns, nearby golf courses and, most of all, neighbors who looked like them. In the early 2000s, home prices soared — some well beyond $1 million — allowing many African Americans to build the kind of wealth their elders could only imagine.

But today, the nation’s highest-income majority-black county stands out for a different reason — its residents have lost far more wealth than families in neighboring, majority-white suburbs. And while every one of these surrounding counties is enjoying a strong rebound in housing prices and their economies, Prince George’s is lagging far behind, and local economists say a full recovery appears unlikely anytime soon.

It is a burden that real estate professionals say confronts homeowners in many heavily African American neighborhoods.


Emerick A. Peace, operating partner of Keller Williams Preferred Properties in Upper Marlboro, said that homes in the county are undervalued. But that will not change, he said, until more people of all races show interest in moving there. Demand from only African Americans in effect puts a lid on prices, he said.

In Fairwood, dreams of black wealth foundered amid the mortgage meltdown | The Washington Post

Fairwood is a sprawling 1,800-home subdivision in Prince George’s County built on a former slave plantation that was once owned by the state’s 34th governor, Oden Bowie. It should have been a success story for black Americans.


The decade-old neighborhood is 73 percent black and its residents have a median household income of more than $170,000, according to the census. Some houses there once sold for more than $1 million.


But half the loans on newly constructed homes in Fairwood during the housing boom in 2006 and 2007 wound up in foreclosure — 723 of 1,441 so far, according to a Washington Post analysis of private and public mortgage data.

Less understood is how the crisis played out block by block and continues to reverberate in Prince George’s, the wealthiest majority-black county in the United States. It was also the epicenter for mortgage failures in Maryland. Today, far fewer blacks are getting home loans in the county, foreclosures are on the rise again and the African American share of the population has started to decline there for the first time since the civil rights movement.

In Fairwood, houses once valued at $700,000 are going for $350,000. Legions of homeowners who bought high have seen their equity evaporate, and still labor under hundreds of thousands of dollars in debt. And the percentage of blacks being approved to buy in the neighborhood has declined, even as deal-seekers of every demographic move in.

A Washington Post analysis reveals what a drive through the neighborhood’s stately houses might not: the effect of subprime lending on the community. Of the 1,441 loans made in Fairwood between 2006 and 2007, 416 were subprime, which are riskier loans that carry higher fees and interest rates that adjust frequently, according to federal home mortgage data.


In the lead-up to the crisis, borrowers in Prince George’s earning more than $200,000 per year received subprime loans 31 percent of the time, the highest rate in the nation for a county where 750 or more subprime loans were made.

Bair’s first target was the California-based Fremont Investment and Loan, located in Brea, Calif. Fremont was Prince George’s largest subprime lender, records show. Of the 4,320 home loans in the county that the firm made in 2006 and 2007, 94 percent were subprime. Almost half failed.


Fairwood borrowers received 32 loans from Fremont, according to federal mortgage data. More than half the loans had interest rates five percentage points or higher above prime rates.

Distressed family swamped by an underwater home | The Washington Post

A decade ago, Comfort and Kofi were at the apex of an astonishing journey they had made from Ghana in 1997, when they had won a visa lottery to come to America. They did not know it at the time, but they were also at the midpoint in their odyssey from American Dream to American Nightmare.

Today, they struggle under nearly $1 million in debt that they will never be able to repay on the 3,292-square-foot, six-bedroom, red-brick Colonial they bought for $617,055 in 2005. The Boatengs have not made a mortgage payment in 2,322 days — more than six years — according to their most recent mortgage statement. Their plight illustrates how some of the people swallowed up by the easy credit era of the previous decade have yet to reemerge years later.

Working through a mortgage broker, they applied for a loan, which they received from Lehman Brothers Bank under Kofi’s name. They said they were told that, based on their income, they could qualify for an interest-only, adjustable-rate mortgage. They would pay only the interest for the first five years, after which they would be required to make payments on the principal and interest. Such loans are riskier, and borrowers and have been shown to default at higher rates than a traditional 30-year fixed rate mortgage.


The Boatengs ended up borrowing $493,600 from Lehman Brothers, at an initial loan rate of 6.1 percent. In five years, it would reset to at least 8.3 percent. Their payments would start at $3,662 and go up to $4,336.

The couple are also working with Housing Initiative Partnership, a HUD-certified housing counseling agency, for help in getting a loan modification. Their housing counselor, Lee Oliver, said their downfall began with the idea of buying a second home for more than $600,000. They were stunned they could own something like that, she said. “Then they just took a leap of faith,” she said. “Where I’m from, these houses were only for white people.”

[brentwoodgirl]

Let's review a couple of points from the article:

In the lead-up to the crisis, borrowers in Prince George’s earning more than $200,000 per year received subprime loans 31 percent of the time, the highest rate in the nation for a county where 750 or more subprime loans were made.

The couple are also working with Housing Initiative Partnership, a HUD-certified housing counseling agency, for help in getting a loan modification. Their housing counselor, Lee Oliver, said their downfall began with the idea of buying a second home for more than $600,000. They were stunned they could own something like that, she said. “Then they just took a leap of faith,” she said. “Where I’m from, these houses were only for white people.”

Do I think we should lower the loan qualifications so idiots who make $200,000+ a year can still get risky loans on million dollar houses?

Do I think we should lower qualifications so idiots can buy $600,000 second homes?

No, I think people should learn to quit being idiots with your money. If you are making $200,000 a year, you should be intelligent enough not to taking out subprime loans. If you are not, that's your own fault.

Lowering qualifications to get people into houses they can't afford is absurd.

[Volobjectitarian]

1) Leviathan decrees that more people with bad credit should own homes, and forces lenders at the tip of the centurion spear to make mortgage loans to these credit risks.

2) Mortgage lenders find a way to do so profitably and with less risk...with Leviathan's blessing, so long as the loans are being made and Leviathan can crow about how caring they are.

That's what created the entire sub-prime market, in the order it happened.

OK, now the sub-prime market exists. You can now paint for your down payment (see "Chandler and Gilbert AZ" for more on that), you can get in for closing + $1,000 and a low 2.5% interest rate that balloons to 10% in 3 years, and requires a balloon payment at the 3 year mark of $12k, etc etc. How vile and unscrupulous and mean spirited....right?

Yeah, once again, lost in all this is the VOLUNTARY PARTICIPATION of the Borrower. No bank in existence forced any of these loans on anyone. No bank put a gun to the head of the borrower and said "sign here or else!!" No no, the borrower sought out the sub-prime lender because the normal lender told them to go pound salt (whether right or wrong, the normal, prestigious, traditional lenders were saying no even during the sub-prime heyday). The sub-prime lender, by law, had to have the terms written contract, and if questioned on any point in said contract, were bound by law (rather old law at that) to answer those questions truthfully else be in breach of contract. Nothing about any sub-prime loan happened without the consent and willing participation of the borrower. Not one single thing...ever.

Are salesmen scumbags? Sure, but along with caveat emptor, salesmen scamming you is common knowledge going back to the freaking Old Testament.

Every sub-prime "victim" grabbed a pen and voluntarily signed on the dotted line...dozens of lines actually, given the average mortgage contract. If they made a Faustian bargain, it was their soul and they chose to sell it. Never forget that.

PS - if you were to rank the things that perpetuate the myth of the "po' ignorant black person that don't know nuthin' about dem fancy loans and such", number one by a wide margin would be these victim essays written by bleeding hearts in the media-political complex. You read the entire series and underlying the victim narrative is that black folk be too dumb to read the white devil's mortgage contracts and what not yo.

If I was black, every time I was asked to feel sympathy according to the "blacks are helpless morons" narrative, I'd be enraged at the author trying make everyone who has my same skin tone seem like a total idiot.

[Kibby]

but what I want to know from you all is if you feel as though this type of occurrence is going to significantly impact the black middle class in the US in the future?

The median income from this neighborhood is $170,000 ..... do you think that is the Median income for anyone (White,Black,Yellow,Purple) of the Middle class in the USA? The particular couple you posted about actually have an income of $200,000 - significantly larger than the Median. They have lived rent/payment FREE for 6 years now without being evicted from their Million dollar plus home ...... if I could have ever lived payment free for 6 years (with an income of half of this couple - I would have saved a Bundle and retired lot earlier than I did.

I live in a middle class neighborhood with middle class Black, Asian, Gay, Arab, Hispanic neighbors with middle class incomes. It's a desirable neighborhood because of location and great schools - when a house comes up for sale, it sells immediately. The top employers of the residents of Prince George County are Government & Public service - all Taxpayer funded. They are supposedly well educated and certainly well compensated - they also made deliberate choices to acquire a huge Debt Load that they could not or would not pay and live far above their means.

I don't feel a bit sorry for them or for anyone who does this sort of thing.
Memo to kiddos that read this forum - Homeownership is not a "measure of wealth", it's essentially paying 'rent' to yourself instead of to a stranger. Owning a home is not 'money in the bank" - even when it's paid off, it's only worth what somebody is willing to pay for it.

[brentwoodgirl]

Originally Posted by Volobjectitarian

1) Leviathan decrees that more people with bad credit should own homes, and forces lenders at the tip of the centurion spear to make mortgage loans to these credit risks.

2) Mortgage lenders find a way to do so profitably and with less risk...with Leviathan's blessing, so long as the loans are being made and Leviathan can crow about how caring they are.

That's what created the entire sub-prime market, in the order it happened.

OK, now the sub-prime market exists. You can now paint for your down payment (see "Chandler and Gilbert AZ" for more on that), you can get in for closing + $1,000 and a low 2.5% interest rate that balloons to 10% in 3 years, and requires a balloon payment at the 3 year mark of $12k, etc etc. How vile and unscrupulous and mean spirited....right?

Yeah, once again, lost in all this is the VOLUNTARY PARTICIPATION of the Borrower. No bank in existence forced any of these loans on anyone. No bank put a gun to the head of the borrower and said "sign here or else!!" No no, the borrower sought out the sub-prime lender because the normal lender told them to go pound salt (whether right or wrong, the normal, prestigious, traditional lenders were saying no even during the sub-prime heyday). The sub-prime lender, by law, had to have the terms written contract, and if questioned on any point in said contract, were bound by law (rather old law at that) to answer those questions truthfully else be in breach of contract. Nothing about any sub-prime loan happened without the consent and willing participation of the borrower. Not one single thing...ever.

Are salesmen scumbags? Sure, but along with caveat emptor, salesmen scamming you is common knowledge going back to the freaking Old Testament.

Every sub-prime "victim" grabbed a pen and voluntarily signed on the dotted line...dozens of lines actually, given the average mortgage contract. If they made a Faustian bargain, it was their soul and they chose to sell it. Never forget that.

PS - if you were to rank the things that perpetuate the myth of the "po' ignorant black person that don't know nuthin' about dem fancy loans and such", number one by a wide margin would be these victim essays written by bleeding hearts in the media-political complex. You read the entire series and underlying the victim narrative is that black folk be too dumb to read the white devil's mortgage contracts and what not yo.

If I was black, every time I was asked to feel sympathy according to the "blacks are helpless morons" narrative, I'd be enraged at the author trying make everyone who has my same skin tone seem like a total idiot.

Great post. I can't rep you again right now, but I totally agree with your entire post.

And on the part I bolded, this article is even worse than most. It's saying that even if blacks make it to the top 5% level of income, they are still too dumb to be able to qualify for a regular mortgage. They need pity and help from the government.

This narrative is incredibly demeaning.

And I hate how these articles use language that implies the people involved were innocent victims forced into subprime loans:

Their plight illustrates how some of the people swallowed up by the easy credit era of the previous decade have yet to reemerge years later.

They weren't "swallowed up." Their "plight" was being greedy people who wanted a $600,000 second home they couldn't afford.

“Then they just took a leap of faith,” she said. “Where I’m from, these houses were only for white people.”

They didn't take a leap of faith and being black has nothing to do with their greed. They chose to buy something that couldn't afford and now they are blaming the banks and being black on their decisions.

[AKA Bubbleup]

Originally Posted by justtitans

do you believe it is more beneficial for our nation to create more opportunities for minorities to own homes or do you think the standards should remain high at the risk of shutting out a large portion of potential minority homeowners?

Minorities should have the same exact opportunities as everyone else. Period. The 'more opportunity' you're referring to is a significant contributing factor to the foreclosure crisis that is still looming over the housing market.

It all goes back to the housing boom in the late 80's early nineties. It was an era where steady increasing home prices were allowing people with jobs and good credit to sell their homes at a significant profit and periodically trade up to nicer more expensive homes building equity for retirement.

This caused a hand wringing issue for progressives that felt 'Dear God (maybe progressive wouldn't have actually used the word 'God') so 'Oh Dear', we have all these minorities (and poor) that are being denied the opportunity to climb aboard this lucrative band wagon. It's our duty to loosen the mortgage restrictions of our GSE's (Government Sponsored Enterprises - Fannie, Freddie, Ginnies) so they have the same opportunities (but really different through looser restrictions) as everyone else.

With that came Clinton's 1995 CRA (Community Re-Investment Act), where banks were basically scored on how many mortgages they wrote in poor communities. The GSEs loved this as projections for the returns on loans (projections based on the assumption that the loans would be paid off) allowed the GSE's to appear very profitable on paper.

In order to get the poor to qualify, new mortgage instruments with looser and looser restrictions were written to a point where those instruments generally degraded to what is know as 'sub prime'. These interest only (deferred principle) no money down loans flew out the door allowing banks to score higher, and boosting peoples purchasing power well beyond what they are able to afford. So what, thought the progressives. The loans are government backed and these poor folk will just flip their homes and pocket the hundred of thousands of dollar as they sell for a profit (as even though the late 90's up to 9/11, pricing continued on an upswing).

After the Freddie and Fannie scandals of 2003-2005 (failing to consider the deflating value of sub prime loans in their accounting) and a marginally successful Republican bid to try and place more restrictions on the GSE's the loans to minorities and poor still continued to a degree. Then we got to a point where these loans were securitized, insured and sold at market.

Now the language in the securitized, bundled mortgages stated that if only 5% of the bundle goes bad, then the insurers (think AIG, Goldman, Lehman, Bear Stearns were the largest) had to come up with cold hard cash to cover the entire bundle!!! (that's how things went nuclear in 06-07). Just a slight downturn in the market (mainly due to a saturation point of people giving up on paying their sub prime mortgages) resulted it a cataclysmic slide withing the market.

This the short term liquidity required for the big insures, re-insurers and the biggies holding these instruments to cover was something the the market could not withstand.

In my opinion the language within the bundled load instruments was such that it was patently irresponsible to issue them to a free market in the numbers they did. I'll go a step further and say that this language (cover the full bundles in cash, within days of instruments hitting the 5% threshold) WAS INTENTIONAL, causing perhaps the largest deliberate transfer of wealth since the concept of currency emerged.

So back to the subject of of giving minorities more opportunities, consider what happened the last time we did that. Do you really want to go through this again?

[justtitans]

I applaud everyone who has responded so far. You all see through the sob story. As a black man, I am highly offended by the notion that brentwoodgirl alluded to where they make it seem as though black people are too stupid to make good decisions. These individuals often times were greedy and in some cases ignorant and they allowed their desire for status to cloud their judgment.

I also agree with AKA Bubbleup, this is a clear example of why home ownership is not meant for everyone. I believe the best way to get more minorities opportunities for home ownership is to increase financial literacy not to lower the standards to qualify for these programs.

[Volobjectitarian]

Originally Posted by AKA Bubbleup

With that came Clinton's 1995 CRA (Community Re-Investment Act), where banks were basically scored on how many mortgages they wrote in poor communities. The GSEs loved this as projections for the returns on loans (projections based on the assumption that the loans would be paid off) allowed the GSE's to appear very profitable on paper.

Agree with everything except this. Clinton did give sharper teeth to the CRA (sorta, he also made it easier to let banks hide among the GSEs), but that nonsense was first handed in one big package in 1977, under the 2nd worst President's administration.

But the rest of your post is right on.

[AKA Bubbleup]

Originally Posted by justtitans

I believe the best way to get more minorities opportunities for home ownership is to increase financial literacy not to lower the standards to qualify for these programs.

Forum rules do not allow me issue a positive rating 1,000,000 times (so one for now)

[AKA Bubbleup]

Originally Posted by Volobjectitarian

Agree with everything except this. Clinton did give sharper teeth to the CRA (sorta, he also made it easier to let banks hide among the GSEs), but that nonsense was first handed in one big package in 1977, under the 2nd worst President's administration.

But the rest of your post is right on.

If you get the change dig into this

from article:
In 1995, the Clinton Administration changed the law governing GSEs’ mission — the Community Reinvestment Act (CRA) — to encourage more lending in poor neighborhoods. Previously, the CRA directed government to monitor banks’ lending practices to make sure they did not violate fair lending rules in poor neighborhoods. With the 1995 change, the government published each bank’s lending activity and started giving bank ratings based primarily upon the amount of lending it performed in poor neighborhoods. These changes empowered community organizations, such as ACORN, to pressure banks to increase lending activities in poorer neighborhoods — which involved reducing mortgage loan standards — or face backlash from those organizations’ private and political associates. For instance, if Chase made 100 mortgages in a poor Chicago district, and Countrywide 150, the government would likely give Chase a lower CRA rating, and community organizers could pressure politicians to make it more difficult for Chase to get licensed to do full ranges of business in new areas of the country. Low CRA ratings could also disadvantage Chase with regard to government lending programs and make it more difficult for Chase to participate in mergers and acquisitions.

The pressure or 'teeth' was the most significant factor in Chicago area sub prime foreclosures to increase 4,623% between 1996 and 1999. Read the full article for some insight into the part ACORN played in strong arming banks to issue those crap loans.

Enjoy