Affluent Black County Mired In Mortgage Mess
 

What say you, GCers?

This is unfortunate but not surprising considering what is happening in other affluent (and nonaffluent) communities across the country.

It also highlights the different costs of living across the country. Paying $200K for a 646 sq ft house or condo is unheard of in some cities. It is considered CHEAP in other cities.

I watched House Hunters last night and said "daaaaaaag" at some of the costs of the houses and condos. I consider some of those houses substandard and not worth even half their cost---but it's based on cost of living. The house hunter on last night's episode ended up purchasing the only condo that was worth purchasing. Even it was way more expensive than it would be in other cities.

Discriminatory lending practices that disproportionately impact racial and ethnic minorities, including those of upper socioeconomic status, has been observed, discussed, and studied for over a generation. Therefore, it is no shock that racial and ethnic minorities, including the higher social class, are disproportionately represented in the housing crunch. That doesn't mean that the majority of instances in this context are a result of discriminatory practices.

With that said, I wonder what the larger outcome is going to be with this housing crunch.

I'm really not surprised, even though the DC area was less hit by the foreclosure mess than say, south Florida or the Inland Empire. Also, I WISH I could find a 650 SF apartment for $200K.

I have a lot more to say about this, which will have to wait--mainly about the pressure that affluent blacks receive from family and friends to buy a house right away after finishing college or graduate school, by any means necessary. For so many people, homeownership is the American Dream fulfilled and this yearning may be even stronger for blacks and Hispanics. The hysteria of the mid-aughts increased that since people were afraid of "being priced out."

I agree and I always shake my head at those of the upper socioeconomic because they should know better (I only say that because of the mentality of many upper socio, other times they are upper by salary and not upper by wealth so do we really consider them upper?). There definitely needs to be more education in lending.

Technically, no.

Socioeconomic status and social class rankings are based on qualitative economic distinctions of the source of the income rather than the amount of the income.

If someone has no wealth and their income is only based on salary--meaning, if they went jobless, they'd immediately be shit out of luck--their membership in the upper class club is fleeting.

***************

Also, if someone has a salary of $150K before taxes and debts of $140K, especially with no wealth accumulation, their debt-income ratio is comparable to someone with a salary of $40K. If the $40K salary is matched with a debt of $10K, the debt-income ratio can be better than the $150K person.

On that note, a lot of people with $150K salaries would not qualify for certain 30 year fixed rate mortgages based on their payment-to-income-ratio. They would have to get a different type of mortgage loan (like the dangerous ARMs) and some (more considerate) lenders would either advise them to get a cheaper house or wait until their debt has lessened.

I understand that there were a lot of people (not necessarily in this area, but in general) who were told things like "oh, you'll never qualify for this (good) loan, why don't you apply for this (not-so-good) loan?" Certainly, as you point out, people should be educated, but someone who is not a mortgage professional can't be expected to have the knowledge of a mortgage professional. Same with the realtors giving bad advice. Even people who had lawyers later found out that they couldn't trust them either.

I'm not absolving the buyers of blame, but certainly many, many people were complicit.

Oh I agree as well with exactly what you are saying which I why I don't place blame solely on the buyer. Wasn't trying to. I just know when the housing boom started a red flag came to my mind when I first started seeing people I know for a fact would not afford the home they lived in. I wasn't trying to be arrogant but it was simple math.

DeltaBetaBaby, I agree but people need to stop putting the onus on the mortgage lenders and realtors. These people are in big business and, unless you have some networks in the industry, this is straight business and not personal for them. They have only changed practices now because the Federal government is getting more involved.

People need to do some research. There is actually a lot of information out there that potential homebuyers can access. That includes community organizations (including some BGLOs) that do economic or homebuyer seminars. It is extremely confusing but take the time to read, compare, question, challenge, research, talk to different mortgage lenders, talk to anyone you know who has bought a house, see what your options are...cry and pray to the Heavens if need be. Just don't sit around waiting for everyone else to look out for you. These are college-educated people who are considered to be among the higher SES of Blacks in America. Surely people can't boast intelligence and kickassness when it comes to careers but then expect to be spoon fed elsewhere, especially given the nature of capitalism and discriminatory lending practices.

As it pertains to racial and ethnic minorities, this can be even more difficult because the average Black and Hispanic in this country is first generation(insert education, career, salary level). That makes it even more difficult to talk to family, friends, and access networks who have bought a home and/or who know what they are talking about. Even then, still talk to people and read/watch/research. After you get the info, you can more prepared to decide whether you think what you've learned is complete bullshit. :)

I don't think we are really disagreeing here, but I want to be very clear on the fact that banks did things that were flat-out illegal.

I'm all for personal responsibility, but I'm not okay with it being used as a smokescreen that allows such behavior by corporations to go on unchecked.

I saw this happening a LOT when I used to live in the Inland Empire. It was crazy. My parents bought their house brand new 12 years ago for 1/5 of the price houses in our neighborhood were selling for at the height of the bubble. The average middle-class family got approved for a mortgage that they thought they could afford, but in reality, would never be able to once the adjustable rates started to inflate. There were so many foreclosures in my town. Thankfully my neighborhood went through relatively few, but some of the newer, more affluent neighborhoods had as many as 1/4 of the neighborhood in foreclosure. Before the economic crisis, my area was considered to be one of the more wealthy areas in the IE, and it still is now, but just like the county in Maryland, it's going through a lot of struggles.

Typical.

Typical of what? Those dark folks you have issues with?

Why would I have issues with "dark folks"?

It's typical that DrPhil/DSTChaos to obsess over skin-color...and then go onto discuss some "skin-based reason" for something happening. It's typical to blame any other race for "failures", instead of taking responsibility.

Apparently "racial minorities" have been targeted by "predatory lending" (whatever that means, borrowing is a persons own decision, so I'm not sure how anything could be "predatory"), but I think the stats will bear out that in this crisis the counties underwater are mostly white or hispanic.

Umm...what?

Quote:

Originally Posted by DrPhil (Post 2062887) DeltaBetaBaby, I agree but people need to stop putting the onus on the mortgage lenders and realtors. ... People need to do some research. There is actually a lot of information out there that potential homebuyers can access.

^^^

LOL Exactly. I don't even know why he tries anymore.

I saw what was said.

She clearly still believes that some may have resulted from discrimination.

She's still obnoxious...why does it matter if Prince George's County is underwater? There are a hundreds of counties well underwater with tons of various demographics.

Oh wait, it's because she's obsessed with race. It's annoying and I'm tired of seeing it always pull up.

Because MSNBC wrote an article about it. DrPhil didn't.

If you're tired of seeing it, don't click on the threads :confused:

We aren't. I said I agree with you and then typed about the topic. :) I already acknowledged what banks have done and continue to do if unsupervised.

Even in that, some of the information was out there and many people were simply choosing to be uninformed about the potential pros and cons. Again, this thread is about those who make a salary that is higher than that of the average America; and therefore people who would claim to have access to resources that the average American does not have access to.

Some people overestimated how flexible their spending should be, some people were just showing off, some people weren't researching--all within the context of bank practices and that other stuff.

***
As usual, today NPR was talking about the economic downturn and the implications for employment and housing.

I used to practice in PG County in Lanham, MD specifically. While PG is the MOST affluent AA community, it is not affluent. As a DC suburb, prices are higher than your average community in the rest of the US. Predatory lending cannot be discounted as a factor in this topic as African Americans were a group hard hit by those perpetrating that fraud. People made bad choices, but for ten long years houses were ATMs that many times dispensed more money than people's full time jobs. If it sounds too good to be true...

Of course the most affluent Black community would not really be affluent. LOL. Yay.

Exactly.

There are plenty of affluent people in PG, but there are mostly middle class African Amercans and poor AA in the county. Of course, hispanic, white and Asian people live there, too. It was explained well to me by my "Black" boss, he hated the term African American unless you were from Africa. I tried not to get him started. LOL

Yes, I know all about PG.

Please don't just cite your Black/African American boss. I consider it the equivalent of "some of my bestfriends are Black" when a topic doesn't call for it. :)

He's a pretty good judge of the make-up of PG County as the President of the PG Medical Society. And, I wouldn't call us friends. Since I only practiced there 3 years, I thought his 20 years of knowledge was more pertinent.

So his being your "Black" boss who doesn't like being called African American isn't the gist. ;) Good.

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This isn't a slight to AOII Angel/

PG is predominantly African American. Its ranking as the most affluent African American community is moreso based on how it compares to other African American communities (as the article states "...the most affluent county in America with a majority African-American population" and "...with a majority African-American population. Average income in the county is almost double the national average for Black families") and less on how it compares to non-African American communities. The most affluent African American community will typically not be considered affluent when compared to affluent white communities.

As with most cities and counties in America, a more affluent African American community in PG doesn't mean the larger county is well-off. PG has economic and other issues (as unfortunately can be expected based on a number of correlates). But, so do other cities and counties across the country--yet those cities and counties with high poverty and crime still manage to have white communities that people consider affluent without any disclaimers. Funny how that happens and that speaks to the topic of this thread even more.

/not a slight to AOII Angel

Nah, the main gist was I said AA a gazillion times then called him Black...because he hated being called AA. Those are two different topics. It was pertinent who I got the information from because of who he is and where he lives.

I don't care if it was a slight to me or not, it's pertinent to the conversation so that people don't get this idea that a bunch of rich black people ran around getting McMansions and got what they deserved. These are middle class Americans who are hard working and don't deserve that label.

Like I said, the context of "...the most affluent county in America with a majority African-American population" and "...average income in the county is almost double the national average for Black families" is clear.

This isn't about whether or not people are hard working; and McMansions (which are also purchased by middle class Americans) aren't the only way that people can spend beyond their means with and without discriminatory lending practices.

First of all, discussing whether or not an area is as affluent as another is as old as time and goes beyond race. Do you think that white people suddenly stop caring about which areas are more affluent once no more black people live there? Yeah right. Scottsdale is more affluent than Ahwatukee, but Paradise Valley is more affluent than either. All of these are predominately white with average incomes over $200,000. It still gets discussed.

Secondly, the vitriol extended to people underwater in homes seems to be primarily saved for the most "affluent" who bought monster homes. Most people seem to have a little pity for hard working middle class people who bought an average home in their community and got screwed. It's not so hard in PG due to the high prices for relatively modest homes. Kinda like in Cali. Of course people make other dumb choices, but even to this day, a normal mortgage can be taken out for up to ~45% of your income. That doesn't leave much for bills and other expenses. I for one don't have much criticism for people when we have an unprecedented unemployment rate, as well.

You misinterpreted/misunderstood my post.

Not true. And this is not a vitriol thread.

Exactly why people need to be informed. Shit happens but life isn't completely full of shit. This thread has now come full circle.

Thank your boss for me. :p

Sorry if I misunderstood you. Sometimes it's hard to understand things from a post. This thread may not be vitriolic...yet, but the whole topic leads to a lot of heated discussions. LOL at thanking my ex-boss for something. He's gotta be worth something cuz I left on poor terms with him! We were too much alike I guess, but that is NOT pertinent to the discussion.

If it turn vitriolic, we know who to blame.

That (person) has already been called out.

ARMs
 

Credit Score is a huge factor in the origination process and ARMs have stricter underwriting guidelines than a standard 30yr Fixed Rate Mortgage. The days of going into these "Dangerous ARMs" got shut down during the Subprime meltdown. Specifically, Hybrid Option ARMs. Indeed they were dangerous when sold to the wrong client. But they haven't been actively trading in the Market for several years now.

What do you mean? I'm not the most familiar with Hybrid Option ARMs, but the issue with ARMs hasn't gone away. In 2011, there are still homebuyers who are opting to do a 1, 2, 5, or 7 year ARM despite being warned by mortgage lenders and anyone else who knows the potential dangers.

There are ARMs that are not bad. I got an ARM 10 years ago. It was fixed for 2 years and after that, it is adjusted annually. It is a set percentage above LIBOR. It cannot change more than 2% at one time (up or down) and it cannot go higher than 5% above the original rate. It is currently at 4% and has gone down every single year since it has been adjusting. There are no "gotchas" of a balloon payment at the end of a certain time period or anything. Even if mortgage rates skyrocketed now, they would have to continue to skyrocket for 5 years before I would hit the max at this point. Yes, there is a danger that it could go up to 13% max, but it really isn't likely that we'll see the LIBOR go up that high over the next 10 years. It is a pretty safe ARM. I'd have been paying 8% for the last 10 years had I gotten a traditional mortgage and I'd be unable to re-fi at this point because the house could never appraise for high enough in this economy. Mine is a very low risk ARM and has served me well.

People are still originating the vanilla Agency ARMs and Jumbo ARMs but the underwriting guidelines are stricter. Yes there is still risk that people will default just like any committment you make when you borrow money. There is always a chance that someone won't make the payment (even for folks with higher credit scores) for whatever reason. The Credit Score and low DTIs are a gauge that tells the lender if the borrower is most likely to make their payments and prepay the mortgage.

The days of not qualifying on a 30yr Mortgage and getting tossed into an "ARM" are gone. If anyone in the banking world is still originating Hybrid Option ARMs (definition: a mortgage that would allow you to get a 1.00% interest rate for the first three months and then cast into options of either going Fully Am, Interest Only, Fixed, etc that was typically attached to the MTA or COFI index) then the risk is being retained on a balance sheet at the bank and is not going into the securities market. Those types of securities have no liquidity. Yes, prior to the Subprime meltdown if a borrower couldn't get underwritten on a 30yr Conventional they had an option to get into a Hybrid Option ARM which had looser underwriting guidelines to get into a mortgage.

Thank god I called her out, too.

:) Yes, some people have benefited from ARMs, particularly people who (1) don't plan on living in the home after the time that the rate will be adjusted; and (2) people who have considered what they will do when the rate increases (perhaps not 13% but they still need to consider how they will pay if the rate is higher than expected).

Since life is difficult to predict, many people (homebuyers and housing professionals) are recommending against ARMs if the only incentive is the introductory rate. That and the economic crisis fueled the housing crunch once people's dream house's introductory rate increased to the prevailing rate and people couldn't pay (partly because the average American doesn't save much money and doesn't build wealth).

Thanks for explaining. As for the bolded, some mortgage lenders are advising people against ARMs whereas other mortgage lenders present ARMs as a wonderful, fool-proof option (which is why research is important). Either way, people generally may not be tossed into an ARM but, especially when using a mortgage lender that doesn't advise against an ARM, people are choosing the ARM either immediately or after not qualifying for the 15 or 30 year fixed rate. What eventually happens to a lot of people after that introductory rate moves to the prevailing rate has been discussed in this thread.

If I had a dollar for every time I read "don't let mortgage rates/bad credit/whatever keep you from your dream home" on a mortgage lender's website in 2011. People need to buffer their excitement with research. There are home buyer and mortgage tools that help people consider the potential pros and cons of it all.

ARMs are a risk. Not all are created equally obviously. Subprime loans got us into this mess, and luckily those have been axed. I have a 5 year arm on my B'more house. We didn't think we'd be there 5 years...we were right. It resets next year, and hopefully we will be selling it by then. If we don't, it won't be a tragedy. Even if the rates don't stay this low, we will be able to afford the difference. I will hopefully be closing on a condo in Phoenix next Monday with a 30 year fixed. I agree with Dr. Phil. I'm not messing with a 5 year arm this time. We only have to put down 5% so the equity we have in the property is not enough to refinance later down the line.

ARMs
 

Which lender is underwriting ARMs for customers that do not qualify on a fixed rate mortgage? That sounds like a red flag.

To clarify, for customers who do not qualify for a particular size of mortgage loan.

To answer your question, mortgage lenders who know that lower introductory rates mean lower introductory payments. Therefore, homebuyers can qualify for a larger loan to fit the dream house that people are told not to let mortgage rates/bad credit/whatever keep them from.

I should also note, with mortgage rates what they are now, it's silly to get an ARM because it can go nowhere but up. Unless the LIBOR was 0, mine is currently as low as it can possibly go. When the rate was 8.75% (when I bought it), it was a good risk. I'm trying to pay down a lot of extra principle while rates are this low because then if they do go back up again, I won't be paying interest on as much principle.