The 'Mortgage Meltdown' Was No Accident

By Kai Wright, The Nation. Posted June 30, 2008.

Research support for this article was provided by the Investigative Fund of The Nation Institute.

George Mitchell's wife, Lillian, took her last breath in the house she loved, on New Year's Day 2006. "Right there in that spot," says George, 77, nodding to the far end of his worn, floral-print couch. "I think the last words she spoke was my name."

"Yup," confirms his youngest daughter, Chandra Chavis. "I was trying to perform mouth-to-mouth resuscitation at the time." She points out the living room window to the small, sloping front yard and drive. "There was no address on the house, so I had to stop doing that to get the ambulance to come in." But Lillian's heart had seized, and Chandra knows there's not much she could have done anyway. She figures if even the trauma team at Atlanta's century-old public hospital couldn't revive her mom, she must have been long gone. "Nobody can bring you back if the Lord calls you," concludes an older daughter, Gwen Russell.

It was Lillian's tenacity that led the Mitchell family to Atlanta's Westwood neighborhood, in 1968. "She was determined," Chandra explains, "not to have her children in an apartment -- I know the story; I've heard it a million times -- so she found somebody, a real estate agent, and they came out and they looked in this neighborhood. I don't know what brought them to this part of town, 'cause at the time they were living in Dixon Hills" -- then an up-and-coming black neighborhood -- "but she decided she wanted a house, and this is where she found it."

"All I did was sign the paper," says George with a shrug.

That made the Mitchells one of the first African-American families to move into Westwood. Atlanta has long been known as the "black Mecca," a place where African-Americans have been able to claw up the socioeconomic ladder and plunge into America's consumer culture. Nowhere is that striving more visible than in the massive subdivisions of large, new homes that Atlanta's black bourgeoisie have erected, reaching far into the suburbs. But the process began generations ago in a cluster of inside-the-beltway neighborhoods wedged into the city's southwestern corner, including Westwood. Today that area is reeling, having been one of the nation's communities hardest hit by the one-two punch of subprime lending and home foreclosures. The Mitchells have not been spared. Like hundreds of thousands of Americans, they are scrambling to keep the house Lillian found for them.

Nearly 18,000 homes faced foreclosure in the Atlanta area during the first quarter of 2008, an almost 40 percent jump from the first quarter of 2007. In Fulton County, which encompasses most of the city's core and is heavily African-American, one in 122 homes was in foreclosure in the first week of April. A digest of Atlanta's March 2008 "foreclosure starts" was as thick as the phone book, and the Mitchells' 30310 ZIP code topped the list.

The area boasts an old stock of quaint, midcentury houses painted in bright yellows and crisp blues, accented with quirky touches that now feel more haunting than homey. On block after block, as many homes sit vacant or bank-owned as not. Boarded-up windows lurk behind white-columned front porches, and the yards are slowly going to weeds and trash. On one block, eleven boarded-up houses line the street, making the area look like it's been hit by a natural disaster.

But the disaster is depressingly man-made. And this neighborhood reveals a deeply troubling dimension of it, one that will echo long past the recovery everyone hopes will soon come: for black America, the "mortgage meltdown" looks less like a market hiccup than a massive strip mining of hard-won wealth, a devastating loss that will betray the promise of class mobility for tens of thousands of black families.

As the mortgage crisis unfolded, observers of all political stripes repeated a boilerplate line: the "affordability products" that have flooded the lending market in recent years -- from subprime to interest-only loans -- have done more good than bad by fueling a surge in black and Latino homeownership. But while minority homeownership may have grown in the short term, the long-term outlook promises quite the opposite, as southwest Atlanta painfully illustrates.

First-time homebuyers have originated less than a tenth of all subprime loans since 1998, according to a 2007 Center for Responsible Lending analysis. As recently as 2006, just over half of all subprime loans were refinances of existing home loans. The expected foreclosure toll from these loans will outpace the ownership gains by nearly a million families, the center estimates.

That's particularly true in established black neighborhoods like Westwood, where banks and brokers targeted vulnerable longtime homeowners and lured them into needless and rapidly recurring mortgages they clearly couldn't afford and from which they never stood to gain. More than half of all refinance loans made to African-Americans in 2006 were subprime, according to an analysis by the advocacy group ACORN. That's nearly twice the rate among white borrowers. Among low-income black borrowers, 62 percent of refinance loans were subprime, more than twice the rate among low-income whites.

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Kai Wright a writer in Brooklyn, New York, is the author of "Drifting Toward Love: Black, Brown, Gay and Coming of Age on the Streets of New York." Research support was provided by the Investigative Fund of The Nation Institute.