I may have to reconsider the name of this blog .... maybe it should be "Stupid Derrick Z. Jackson" tricks considering his latest hypocritical blathering in today's "Boston Globe" (May 18, 2010)An elusive payoff Gains elsewhere belie a wealth gap for black families
In his essay he brings up anecdotes to demonstrate the progress blacks have made in the pursuit of the "American Dream" of housing. More than 50% of blacks now live in the suburbs instead of core urban areas and even a black president has moved into the White House.
But he then cautions that all is not as it appears because of HUGE disparities in the amount of accumulated wealth between blacks and whites. He mentions a study just released by Brandeis University’s Institute on Assets and Social Policy that shows the gap in wealth (between blacks and whites .. excluding housing equity) has been growing and has almost quadrupled in the last 25 years. It's here that Jackson seems to have rounded up all the "usual suspects" of hackneyed cliches and arguments based on racism that either don't stand up to the most perfunctory analysis or that are so incompletely thought out that I wouldn't have allowed my teenage kids to use them in an high school science project.
To Mr. Jackson, the " ..the asset gap is probably embedded in America’s housing and lending structure.." and he then goes on to add the "factoid" that "which still rejects African-American households at higher rates than similar-earning white households for housing and home equity loans. That disproportionately forces black families into more onerous financial arrangements." "Yawn" (I don't think Derrick Jackson is stupid but, if he's not, I'm glad he's so intellectually lazy .... it makes debunking him that much easier.
In the article it's impossible to tell if it's one of the studies co-authors (Thomas Shapiro) claiming, or it's it's Mr Jackson who says, the study " ..belie the stereotype that African-Americans are less wise with their money, since savings rates of black and white households are similar by income." That's just nonsense. That the savings rate for blacks and whites is similar by income means only that the savings rate is similar by income ... nothing more nothing less. And it is explicitly lacking in any information on how the rest of income is spent!! ANY disparities in the handling of money NOT SAVED (that is, the money spent) may very well lead to spending patterns that some may deem "less wise" and result in differential "wealth accumulation" outcomes. See how easy it is Derrick?
Yes, blacks are rejected for loans and mortgages at higher rates than whites and, "in general", are accepted with rates that are not as good as whites. This was pointed out clearly in the 1992 Federal Reserve Bank of Boston study that "allegedly" found patterns of lending discrimination in the Metropolitan Boston area. That same study also clearly stated that whites had higher credit scores than blacks. In fact, the Boston Fed had to wade through reams of data to find out how much of the difference could be attributed to "real" differences in how people handled their money (REAL credit worthiness), job stability, down payment, ratio of income to anticipated debt .... all the REAL issues that determine an application's fate. In fact, it was only after these factors were taken into consideration and 85% of the "apparent disparities" disappeared, did the Boston Fed determine that the small amount left was the result of discrimination. Thus, 85% of what Mr Jackson might alleged is discrimination the Boston Fed found represented REAL differences in credit worthiness.
(Please note, that Boston Fed study has been reexamined and many claim that the methodology was so flawed that even that small remaining disparity might be a mirage. One critic even hinting the study was "consciously fraudulent" (Roberts 1993). I was always shocked that almost 30% of the mortgage applications that were declined, the Fed didn't use in the study because the applications were so incomplete as to be statistically useless. I always wondered how not using 30% of one subset might have affected the final result.)
More importantly, this notion of "discrimination in lending" also fails to address that REAL discrimination is not new or that there is a very easy way to bypass the discrimination and access capital ....... racial and ethically based banks and credit unions. In the early 20th century, when those loud, coarse, "clever" Jews were denied mortgages at traditional banks they established their own banks like the Grove Hall Savings Bank in Roxbury, the Blue Hill Credit Union and others. Those loud Italian thugs had the same option with Italian run institutions like the Haymarket Co-op Bank, Noodle Island Credit Union (East Boston) and others. And even those brawling loutish Irish drunks who were not welcome in much of Boston, let alone the "Yankee" banks, could get banking services at Irish run Meeting House Co--op Bank, Massachusetts Co-op Bank, and myriad credit unions. And those neighborhoods of immigrants grew as those banks supplied capital for mortgages, loans for small businesses, and a places for the these immigrants and their children to safely keep their new earned wealth. Surly Grove Hall Savings might deny a Dorchester Jew a mortgage .... but just as surly, it had nothing to do with antisemitism.
Blacks in Boston did not take that option (or were denied that option) until the Unity Bank and Trust Company was established in Roxbury in 1968. Unity Bank quickly became a major lender for mortgages and business loans in Boston's largely black neighborhoods. Further, to make sure a bank lending to a lower income group wouldn't be under capitalized, all of the guilty conscious do-gooders (and their businesses, Boston Gas, Boston Electric, Prudential, Harvard, Polaroid (remember them?), and numerous others) put deposits in Unity Bank. But instead of prospering while it's long denied core target population finally got the capital input it wanted ... Unity was soon on life support and finally failed in 1982 under the weight of massive mortgage foreclosures and failed business loans.
(I've long lost the source of the quote, but I remember it as if it was just yesterday) one of Unity's board members claimed, after the failure that, "We loaned with our hearts, not our heads." THAT quote speaks volumes because, if there were enough good credit risks in the Boston area black population Unity would never HAD to make a loan using their heart instead of their head. As opposed to the "Grove Hall/antisemitism" example I used above, in this case "Unity Bank" DIDN'T deny loans it should have ..... and it specifically had to do with race!
Unfortunately, this evidence of financial dysfunction didn't end with Unity Bank's failure. Phoenix-like, of out Unity Bank's ashes rose the Boston Bank of Commerce (BBC). For a short time it was also a lender of mortgages and business loans and like Unity, was crippled by waves of defaults and foreclosures. Though it's impossible to prove, to many it seemed that the only thing keeping BBC alive was the idea that the Fed didn't want Boston's only black run bank for fail for the second time in 15 years and that the mid 90's heralded in the era of banking mergers. So bad was BBC's banking business that it's "business plan" seemed to be having State Senator Dianne Wilkerson petition the Federal Reserve Bank of Boston to make the merging banks put capital in BBC as a requirement for allowing the merger. (Ironically, Senator "Cash in her bra" Wilkerson forgot to disclose she was a paid lobbyist for BBC while she was extorting money out of the banks.) So, again Derrick, where were all the creditworthy borrowers when BBC couldn't seem to find them?? Certainly it had nothing to do with racism.
Boston still has a black run bank. The Boston Bank of Commerce was kept alive long enough to allow the arrival of the fabulously successful Kevin Cohen, his wife and their management team in 1995. The bank has been so well run that it set out to acquire other black run banks and become (I believe) the largest black owned bank in the country and it's name has been changed to OneUnited Bank.
Ironically, something odd has happened since the Cohee's arrived ... it has virtually abandoned residential mortgage lending in Boston's black neighborhoods. It is a well run bank and tries not to make stupid loans .... is that why it's written fewer than a dozen standard residential mortgages in Suffolk County in the last decade ... and many of those outside of predominately black areas of Roxbury and Dorchester? Since OneUnited Bank isn't a racist bank, is THIS what creditworthy mortgage lending looks like in minority neighborhoods?
So, Derrick, since even the Boston Fed report that "finds" discrimination exists but also finds that about 85% of apparent disparity is legitimate, does this really ".. disproportionately forces black families into more onerous financial arrangements.." or are these disparities LARGELY a result of something other than discrimination? And if it's not discrimination, might the disparities be the result of blacks being, at least to some degree, ".. less wise with their money"? Hell, not even Kevin Cohee loans to them!
And while Mr Jackson continues with the old tired (flawed) arguments about discrimination, he fails to mention the horrific outcomes of the programs thought up by liberals, do-gooders, those whites with a conscious guilty over their success and other halfwits (you know, Liberals), intended to ameliorate the racial disparities in our society.
Will he ever remind us of 1968, following years of similar sounding complaints about the Federal Housing Administration home mortgages favoring new suburban development and denying mortgages of older urban homes, the FHA announced plans to adjust eligibility to make mortgages easier to get in urban homes? Locally it was administered though a collaboration called the Boston Banks Urban Renewal Group ..... the rightfully loathed BBURG. So poorly was it planned and executed that it resulted in the large scale flight of the largest Jewish community northeast of New York City, and the collapse in the value of home purchased by blacks because of a rise in crime and waves of foreclosures. As I've said so often ... "White's get the money (on the sale of the home) and blacks get the mortgages." that are now larger than the value of the homes. Liberals pat themselves on the back for programs like these.
But this wasn't just a Boston phenomenon. Though the Hart Commission, the congressional investigation into what went wrong, found there had been 1,800 foreclosures in the BBURG sold homes in Boston, the program was adopted on a larger scale in other cities with even more disastrous results ...... St Louis 3,000 foreclosures, Philadelphia 18,000 forecloses and good old progressive Detroit more than 26,000 foreclosures leaving dozens of square miles virtually uninhabited. (See the Boston Globe's snide editorial about Mitt Romney's comments on what happened to Detroit. Romney: Liberals destroyed my house Why doesn't the Globe remind people of the 1968 FHA housing and "doom black homeowners to failure" program? Yet another stupid Boston Globe trick)
Those looking for racism as a factor in America's racial disparities rarely mention the "Savings & Loan" scandal of the 1980's as a causal factor ... that's because they don't know what they're talking about. Though people still state with moral certitude that "black's couldn't get mortgages" or "banks weren't writing mortgages in Dorchester" ... they are still wrong. YES, the federal charted institutions were being "parsimonious" with mortgage lending in Dorchester and Roxbury (though people could and did get mortgages from them (and see Boston Bank of Commerce above)) it was relatively easy to get mortgages from smaller state charted banks. Dorchester Savings Bank (later First American Bank) had it's "Dorchester First" mortgage program and was a major lender in the late 70's early 80's. Workingman's Co-op Bank, Boston 5 Cent Savings and others had branches in Dorchester and were lending ...... I know, I was selling real estate in Dorchester at the time and the local banks were MUCH easier to work with. (I bought my first home in Dorchester with a mortgage from First American and my second with a mortgage from Workingman's)
But by the mid 80's as the real estate market heated up and bank lending standards dropped (or disappeared in some cases) the desire to make sure the sale would go through led people to refer buyers to lenders like Northeastern Mortgage Co. University Bank, Progressive Consumers Federal CU, Dime Savings, Comfed and others that simply wouldn't turn down a loan. When those banks started failing, and mortgage qualifying standards started rising, and those mortgages that never should have been written started defaulting, prices collapsed. And those, in largely minority neighborhoods, that didn't lose their homes to foreclosure were left with mortgage principals far in excess of the value of their homes. Voila !! Less wealth for blacks! Told you it was easy.
(I sold a house to a black couple in 1990 and by chance, there was a mortgage originator in the office when the P&S was signed, so I asked the originator to talk to the couple. The originator (who I will not name because he still lives in and is active in Dorchester's civic life) put together a deal where we would "puff" the price so they wouldn't need a down payment (they would get the money back after the closing), lie about why they had a few late payments, falsify their income ... and then the husband interrupted, "I'm a minister ... I don't think I should be doing those things." The originator shifted gears, and put together a legitimate mortgage package, it was approved, and the house sold. But he was the ONLY person I ever heard object. It was easier to put together a bogus mortgage than a legitimate one!)
But again, when banks cut back on lending following the real estate collapse in 1988-1993, the usual group of half-wits, morons and mental defectives (again, Liberals) came out from under their rocks and pushed for banks to institute first time home buyer programs so all buyers (but with a healthy bias toward "traditionally undeserved buyers" .... minority buyers) could become homeowners. This "democratization of home ownership" resulted in scores of programs like those run by Bruce Marks' NACA, ACORN (RIP), and others and programs like the "soft second" mortgage and, early on, the "InCity" loan program from Fleet Bank. But these programs were, like BBURG 25 years earlier, leaped upon by crooks, speculators and opportunist to turn the programs to their favor at the expense of "largely" minority home buyers.
Though Bruce Marks continues to claim the wonderful things he is doing to help low income "largely" minority home buyers (and was named "Bostonian of the Year" a few years ago by the halfwits at the Sunday "Boston Globe Magazine" ), he refuses to allow anyone access to NACA's raw data to analyze the success of the mortgages and the "helped" buyers home ownership. I suspect the reason could be to keep people from seeing the truth.
One of the first homes in Dorchester that I know conclusively was purchased with a NACA originated mortgage was on Old Morton Street. The NACA assisted buyers purchased the home from a speculator that bought the house two months earlier for $75,000 less and did no improvements. So the white seller gets $75,000 and the minority buyers finance the seller's gain with a $75,000 larger mortgage and Bruce Marks pats himself on the back and tells everyone how wonderful he is. Less than a year later the same speculator did the same thing on a house on Tonawanda Street and, again, walked away with $75,000 the black buyers had financed with their NACA originated mortgage. I could give example after example but you get the point. You know this happened .. don't you Derrick??
Fleet's "InCity" program was even better taken advantage of. "InCity" allowed buyers to use a 5 % down payment but, up to 2 1/2% of the down payment could come from another family member or from a "non-profit". There were many doing essentially the same thing but there were two who really developed scamming black home buyers with Fleet mortgages into an art form.
One would buy three deckers and do some work (give the devil his due) but at a time when the median price for a three decker in Dorchester was $85,000, he was selling them for $180,000 and more (and these properties were in pretty crummy neighborhoods ... not the areas to justify a 100% premium). But what he would do for the buyer was take her (almost always a single woman) to the Bank of Boston in Field Corner and open a savings account in the buyer's name and make a small deposit. Then, week after week, take her to make an additional deposit to make it look as if she was saving for a down payment. (Of course, HE kept the savings book). After enough was saved she could buy his grossly overpriced home ..... hell, for a fee, he'll even get the tenants and manage the building (for another fee) and if things don't go well ..... he'd buy the building back!!! What a nice guy!!! Unfortunately, the one buyer I spoke with that WANTED him to buy the building back found out he only want to pay what the building was worth ... which was half what she paid. White guy rich .. black woman poor. Keeping up with me Derrick?"
The second scam took advantage of the 2 1/2 % down payment from a "non-profit" opening. The other developer would, again buy building or condo cheap from the plethora of foreclosures left over after the housing collapse in 1988-1992, and sell them to buyer's who could get a 2 1/2 % down payment from a black church in Dorchester (a non-profit). There was only one catch, the down payment was only good for buyers of his own properties .... the ones he would purchase and resell for 2 to 3 times what he paid with little, if any, improvements.
You see, the seller was giving the church the down payment and using the black church to "launder" the down payment to his own buyers! And since churches are one of the few organizations with an exemption from submitting financial statements with the Secretary of State .... there was no way to trace the money. Genius. White guy money .... black home buyer gets the mortgage to finance the white guy's gain.
These guys flipped about 90 properties in Dorchester before Fleet cut them off, but you knew that Derrick? Didn't you??
(Mind you, Fleet's defense was that the properties in the second scam were "substantially renovated". I pointed out to the Boston Fed the properties that had been sold one or two days after they had been purchased and one condo that the white speculator bought at foreclosure for $15,000 and sold to one of the "church" helped buyers for $70,000. The two deeds were recorded five minutes apart. I asked, "How much renovation can take place in five minutes". The result ... one guy in Fleet lost his job and all the black buyers still owned grossly overpriced properties.)
Similar stories happened with loans through ACORN and through the "soft second" program, but all of these programs defend themselves with data that "seems" to show that their loans actually perform better than regular loans ... hence, the borrowers needed the loans and the loan programs are good. BULLSHIT. I have a few cornerstones to my intellectual pursuits and one is "A really well framed question is infinitely more interesting than a well framed answer." Do-gooders get the answers they want because they ask (and the Boston Globe accepts) lousy questions.
The loan programs mentioned above MAY be very well run and the defaults and foreclosures I see may be an aberration based on my "stop at the Boston city limits" perspective ...... but I don't think so. The reason these loan programs appear to be a good thing is the way they pose the question .. that is, "If we loan a person money and they make the payments on time and pay off the loan ... then the loan is good and we've helped this person." WRONG!! All that line of reasoning means is that the loan was paid back .. nothing more nothing less.
As in the cases I've mentioned above, there was the sale of a two family house on Beech Street in Roslindale with a "soft second" mortgage and a grant from the City of Boston as a third mortgage. The problem is that the buyer paid a speculator $125,000 more then he paid 5 weeks earlier for the house. (Again, $125,000 to the white seller financed with a $125,000 larger mortgage by the Hispanic buyers). BUT, if the buyer makes every payment on the mortgage and the mortgage is paid off it's considered a good mortgage. Let me tell you, a mortgage who's principal is $125,000 more than the property is worth is NEVER a good mortgage to me ...... especially if the difference is paid by somebody I was pretending to help! And that was BEFORE housing prices collapsed in 2008!
But it's even more nuanced than that. Let's say a buyer with any of the "do-gooder" loans decides to do any of the normal things homeowners do .... put on a new roof, add a deck, paint, new kitchen .... they can get a "line of credit", a second mortgage, or they can just refinance the first and get a new, slightly larger mortgage. If they refinance, the purchase money mortgage(s) are paid off and are forever a "good mortgage". No problem there ... perfect sense.
But what if the owner with the "do-gooder" mortgage is having trouble. They pay the mortgage on the 14th .. before the late charge kicks in or, even paying the late charge, are paying on the 28th day so the mortgage is never 30 days late ... but all their other bills are late. In the last decade, with property values rising and the easy access to "sub-prime" mortgages, it would have been simple to refinance with a sub-prime mortgage, forever establishing the original mortgage(s) good mortgages, even while the home buyer spirals from larger mortgage to larger mortgage with even more egregious terms ... perhaps ending in foreclosure. Ironically, the worse the original do-gooder mortgage, the greater the probability it could have been paid off with sub-prime lending (again making the original mortgage forever a good loan) and the greater the probability of ultimate financial failure by the "helped" buyer.
What SHOULD have been done was to institute a longitudinal study to determine the ultimate success of the "helped" buyer. Jim Campen (a staunch supporter of the "soft second" program and a proponent of the notion of overt discrimination in mortgage lending) referred me to a woman in the Massachusetts Housing Partnership who clearly had no patience for anyone with the temerity to question the success of their programs. When I explained my concerns and that a longitudinal study would have been better, she replied "We didn't have the money for a longitudinal study". When I asked if they had requested enough money to do a longitudinal study she tersely replied "We didn't have the money for a longitudinal study".
To me that says they didn't ask so now they really don't know how many people they may have helped ... or hurt. Ain't liberals great. Still there Derrick?
And now the mortgage fraud in condos (See Globe Article)that set up hundreds of minority home buyers for negative equity and/or mortgage failure. And since the failure of the sub-prime mortgage market in 2008 prices in Dorchester and Roxbury prices have collapsed. While prices in the greater Boston area are down 15-18% from the 2005-2006 peak, prices in minority neighborhoods are down 40-70%, depending upon housing type and neighborhood. But those mortgages these "helped" buyers have NOT come down so they are far further "under water" then others .... including whites. You might say there is an "underwater" disparity.
Remember all my phone calls Derrick? Trying to warn you of how black homeowners were being set up for failure and what did you do??? Nothing. Who's worse Derrick, the asshole that sets out to screw blacks ... or the asshole Boston Globe columnist that has an opportunity to stop the guys and does nothing ???? I guess it just makes it easier for you to always cry racism.
Next time you want to bring something about racial based housing inequities to people's attention ... why don't you start by finding out what you're talking about. Of course, in that case, we might never hear from you again.
