Super-bad: Bank Behavior in Black Majority Counties.

This week the Washington Post did a 3 part series on the effects of the 2008 mortgage crisis in Prince Georges County, a black majority county.  If you haven't read the story (part 1, part 2, and part 3), it is well worth a read.  For now I'll summarize two main points from it:  the mortgage crisis hurt black communities worse than white ones, and housing prices in predominantly black communities have not rebounded in the way they have in predominantly white communities.

There's a lot to chew on in these three installments.  For today, though, I want to focus on one thing.  The extra pernicious behavior of banks in black majority counties during the bubble.  Of course, anyone who followed the bubble and the 2008 recession that followed knows the banks were engaged in go-go lending.  But, the bad behavior was especially bad in black majority areas.  And, despite the wealth of knowledge about how badly banks actually behaved in all neighborhoods, a significant number of commentators still continue to blame borrowers.

Unfortunately, the 'blame the borrower' view assumes that lender and borrower have equal knowledge.  That is, while the banker has your personal asset and income statements, you the borrower know enough about mortgages to know whether you're getting a fair deal.

The story in PG county, and the upper middle class neighborhood of Fairwood, illustrates just how uneven that relationships can often be, and how unfair the banks could behave.

In the third installment of the WAPO series we meet the Boatengs, a couple originally from Ghana.  They owned a townhouse in Germantown but with a growing family they decided in 2005 to find a bigger house.  A friend in their church recommended they check out the Fairwood neighborhood--a upper middle class enclave with beautiful new homes.

The Boatengs fell in love with a house in the neighborhood.  It had a price tag of just over $600,000.  Their joint income at the time was just over $110,000.  By any credible standard, the Boatengs should not have qualified for a mortgage for the house.

But, Lehman Brothers, who gave them the mortgage found a way to make it work.  They had the Boatengs cash out the equity in their town home for use as a down payment.  They used savings to increase the amount, allowing them to take out a mortgage for just under $500,000.  Even with a 100,000 reduction, the loan amount was not sustainable.  By my optimistic, back of the envelope calculations, the Boatengs would have brought home about $7,300 a month (assuming a tax rate of 20%).  Their mortgage payments (according to the story) were $3,662 (more on this in a bit).  That means the Boatengs were paying 50% of their take home pay on housing.  Housing experts argue that families should pay no more than 30% of take home pay on housing costs.  For the loan to work the Boatengs would also need a lot of things to fall into place (and stay in place).  They'd need to find a reliable renter for the Germantown townhouse, for example, and they'd need to keep their jobs.    

So far we have an example of the garden variety bad behavior banks were engaged in during the bubble years.  That is, a bank gave out a loan to someone who'd likely have trouble repaying it.     

But, Lehman Brothers decided to pile on.  The Boatengs were immigrants.  They weren't familiar with US banking.  They believed in the American dream, and like many immigrants the idea that the American dream can turn into a nightmare never occurred to them.  The loan the Boatengs got was an adjustable rate, interest only loan.  For the first 5 years the couple would only pay interest (no equity building here).  After 5 years, they would start paying down some principle, but their interest rate would also go up, from 6.1% to 8.3%.  Not surprisingly, the Boatengs couldn't make the new payments.  They've since gone deeper in to debt to improve their ability to repay their mortgage.  They are in over the heads on multiple front.  Foreclosure looms.  

What happened to the Boatengs is called exploitation plain and simple.  And, it was targeted.  West Africans are about 5% of the population of PG county, but they held almost a third of the mortgages that were foreclosed on in the county. 

Superbad--it ain't just a movie.  It's a bank thing. 

Dodging an Olympian sized bullet

Folks in DMV can breath easy.  Boston was selected as the American city to be put forward to the International Olympic Committee to host the 2024 summer Olympics, besting LA, San Francisco, and DC.

This is good news for many reasons!

1.  Hipsters and athletes don't mix.  Yes, they are both skinny, but only one is emaciated.   

2.  Politicians and athletes don't mix well either.  The doughy unhealthy look is popular in Congress.  Congress is all about that base, no treble.   

3.  Ok, both groups do like to drink.  But one will be off the sauce at game time.  

4.  Metro can't handle 4 inches of snow.  The Olympics would destroy it.

5.  The Olympics does not have a 'hot air bloviating' contest.  The area's pompous asses would have taken their balls and stomped off home when they found that out.    

6.   The Swiss crooksInternational Olympic Committee will get their public assistance checks from someone else's tax base.   

7.  The endless chatter about how much the DC2024 team cares about lining their pocketsDC will stop. 

8.  Dan Snyder won't have yet another way to make money on a losing team. 

9.  Traffic will remain in Dante's first circle of hell instead of descending into the ninth circle, where the millions of people all fleeing hurricanes at the same time live.      

10.  More time to focus on the antics of Kirby DeLauter, Kirby DeLauter, Kirby DeLauter! 

Only in the DMV--Letters to the Editor edition.

When I think about what the political class in Washington DC sounds like, I always think of Washington Post columnist George Will.

Will isn't afraid to use SAT words.  Truth be told, he's already moved on.  He's in GRE territory.  

And, he loves to use obscure historical references.  Usually to a war I've never heard about, or a group that sort of, kind of sounds familiar.    

You know, just to remind you that that all that daydreaming in History has come back to haunt you.  

But, it turns out George Will has some competition.  In the Washington Post's Saturday letters to the editor one Dennis William Chapman wrote in to complain about the previous week's real estate section story on micro houses.  

I'm not a fan of micro-houses anymore than I am a fan of micro-units.  They may be affordable (in a comparative sense), but I reject the idea that affordability basically amounts to high-end SROs (single room occupancy).  I don't care if that tiny counter-top is marble and the space is ergonomic.  If I don't have room to chop veggies, or at least 500 square feet to wander around in, it isn't big enough.    

But, Dennis puts it so much better than I could.  He manages to combine erudition with DC bravadoI will crush you peon.  Here he is in all of his glory:  

"The Post should not promote this artistic debauchery.  The 'green' Philistines mean well, but they must be controlled.  People need art, beauty and a little more room."  

Well done Mr. Chapman.  And Mr. Will, you might want to watch your back!  

Larry Hogan off to a nasty start?

Maryland's governor elect, Larry Hogan, won the game, and he doesn't want you to forget it.    

According to the Washington Post, Hogan decided to do a little in-your-face victory dance at a meeting for Montgomery County business leaders yesterday, telling leaders assembled in a Bethesda hotel:  

"Now, I realize that Montgomery County was one of the three lonely counties that unfortunately voted the wrong way from the entire rest of the state."

Hogan should head back to high school for a civics refresher course.    

There is NO SUCH THING AS A WRONG WAY TO VOTE.  The Constitution gives citizens the right to vote, but it doesn't tell them how to vote.  I know the Maryland GOP has been in political Siberia for some time, but we don't do Soviet style elections here Comrade.

He might also want to head back to an elementary math class.  Those three "lonely" counties accounted for 45% of the state's population in 2010.  Antagonizing them, or treating them as marginal isn't a winning strategy for re-election, let along smooth governing.

Let's hope that Hogan decides to take a political Tums to tame the acid associated with his foot-in-mouth disease.

The World's Oldest Profession--Lobbying?

We here a lot these days about the corrosive impact of interest group politics.  In fact, Jim Webb, a former Democratic Senator in Virginia, just alleged that "the Democratic Party has basically turned into a party of interest groups.

But let's face it, where would all these interest groups be without the geishas of the political world, the lobbyists who connect interest groups to politicians.

And, lest we stop there, let's also ask where those poor lobbyists would be without a roof over their head?  Probably--GASP--in a strip mall.  Lucky for them, there's always a lobby shop from which to hang your shingle--that venerable house of political prostitution that will take your business regardless of your political affiliation (or those of your interest group clients).  Lobbying, it seems, is an end in itself.

Take Annapolis, for example.  The blue state of Maryland now seems a little more purple with the recent election of a Republican governor--Larry Hogan. So, how does your Oldest Profession respond?  Well, they start hiring Republicans of course. 

According to today's Washington Post, the Annapolis lobby shop Rifkin, Weiner, Livingston, Levitan & Silver just hired a "long time Republican strategist" as the firm's "director of business development."

And, to burnish the new 'goods' for sale at the shop, the firm quoted the co-chair of Hogan's transition team complimenting the firm's newest lady of the evening'strategist.'  

Who says we live in a partisan world?  Political prostitution is as purple as it gets. 

Olympian Delusions--DC Style

My new favorite phrase is 'you can't make this sh*t up.'

Why?  Because it always seems to be true. You'd think I wouldn't be surprised by now.  But I am, over and over again.  Some part of me clearly wants to believe people are rational.  But, in reality, few of us are.  Especially the rich.  They aren't just irrational, they are exuberantly irrational.    

Case in point, the local millionaires trying to bring the 2024 summer olympics to DC. 

The Washington Post just uploaded a glowing profile of the movers and shakers behind this deal. See my earlier blog post about them here. 

I won't bore you with fawning portraits painted of the individuals behind the group.  Suffice it to say here that two things caught my eye, and both of them demonstrate the folly of the rich.

1.  The Washington 2024 crowd wants Olympic facilities to be built on city land!  That's right, let's use city land to build stuff for other people, because clearly DC doesn't have any pressing things to spend money on.  I mean, yes, there is that old hospital housing hundreds of homeless families, but move along now, nothing to see here.  Yes, it is true, we need to build some affordable housing, but isn't that what PG County is for? 

2.  The Olympics would be good for DC's reputation on the world stage.  House of Cards make us look bad, they say.  Especially to the Chinese.  And, we simply can't have that.  Whip up some distractions ya'll!   

May I suggest instead that there's an easier way to fix this.  Pull out your capes delusional Olympians, get your wigs brushed out, call in your back up singers, and put Gloria Gaynor's 'I'm coming out' on the sound system.  Then have yourselves a big ole drag party.  You'd do all of us less harm that way.  

Breaking News on Arlington Street Cars, and Bad News for the Purple Line?

The Washington Post is reporting that Arlington is going to pull the plug on planned Streetcars for Columbia Pike and Crystal City.  You can read the story here. 

This is bad news for Arlington, and could signal bad news for Maryland's purple line project.  Why?

Two troubling signs:
1.  Promises of State aid weren't enough to save the project.  Arlington county officials had already secured 135 million from the state of Virginia.  Usually, when transportation projects get killed it is because you can't get the state or feds on board.  They were on board here.  It still got killed. The purple line has a similar set of circumstances.

2.  Opponents of local/state/federal spending on infrastructure are organized.  The Arlington County Board elections a couple of weeks ago saw the ouster of a streetcar advocate and the election of someone ardently opposed to them.  In the WAPO story, the Arlington County Board chair acknowledged that outcome when he announced the decision, saying, "We were caught flatfooted, we did not effectively make the case."  In Maryland, Larry Hogan hasn't said much about the Purple Line, but his anti-tax rhetoric suggests he won't support it.  And, as readers of this blog know, the purple line's opponents are organized and willing to sue to get their way. 

The bigger question--what does all of this mean for redevelopment in the DMV's inner suburbs?  Nothing good for people not adjacent to the city's already jammed metro system.