Homewreckers

The mortgage industry is stealing black wealth--one foreclosure at a time.

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You gotta admire, on some cynical level, a crook who can steal your money and make you believe it's your own fault for getting jacked. That's perhaps the most galling part about the con-job banks and lenders are still running on America. They spent a decade creating the "mortgage meltdown"—knocking down prescient state-level safeguards, dreaming up dangerously exotic products, relentlessly pursuing borrowers whose trust they could exploit—and yet they want everyone to believe that homeowners were the ones making bad decisions.

"The strength of our economy relies on the willingness of people to take risks," Mortgage Bankers Association chair-elect David Kittle told an April 16 House Financial Services subcommittee hearing. "But risk means one does not always win."

This rhetorical blame shifting is important. Not only because it justifies a limited, belated public-policy response to the subprime debacle. But also because it shapes how duped homeowners feel about themselves—and about the restitution they demand.

Take my mother. She's a 62-year-old retired, grade school teacher. She did everything a woman of her generation was supposed to do to earn economic security in her golden years, not least of which was moving from being a renter to investing in a home more than 10 years ago. Then Countrywide came along and convinced her to take out a subprime refinance loan she couldn't afford and from which she never stood to gain. Now she's back to being a renter, having lost the house.

She's not unique. As I reported in The Nation magazine, black folks are at the center of the storm. More than half of all black borrowers who got refinance mortgages in 2006 were sold subprime products. According to a recent study, black and Latino borrowers will collectively lose an estimated $164 billion to $213 billion in the wave of foreclosures following that lending; we'll have absorbed about half the nation's overall foreclosure loss.

But the breadth of the problem in our community has done little to change the depth of my mother's shame. She hid her troubles from my brother and me until the end. She blames herself. She feels stupid.

And that's just what the banking industry wants her to feel—and wants her elected representatives to believe about her as well. If it's her fault, the problem can be framed as one of "risky" borrowers, as a White House official put it in congressional testimony, rather than one of conniving lenders. If it's her fault, the solution is to let industry guide the way out of this mess, rather than have the public sector step in and bring order to the chaos that lenders' reckless behavior has spawned.

Congress has vowed to finally deal with the mortgage crisis this summer. But to arrive at a meaningful solution, we must acknowledge some cold realities about the problem.

The first reality is that no good came from this. An oft-repeated trope is that subprime lending fueled a surge in homeownership in black and brown communities. But as the Wall Street Journal reported, most borrowers would have qualified for prime loans had they not been steered to more expensive subprime ones. Moreover, once the foreclosure dust settles, black America will have suffered a net loss in homeownership, according to a Center for Responsible Lending analysis, because less than a tenth of all subprime loans made since 1998 went to first-time homeowners. More than half were refinances.

Another truth is that subprime lenders were willful—and that makes them predatory. They didn't just use exploding interest rates. Lenders employed a host of tools to trick people into believing clearly bad deals were good ones—undocumented income claims, interest-only payments, inflated appraisals and more.