Foreclosure Crisis Erases Hard-Won Wealth, Dreams Even In Center Of Black Affluence

Janell Ross: Business Reporter, Huffington Post – Posted: 1/31/12 08:01 AM ET  |  

Updated: 1/31/12 05:46 PM ET

BOWIE, Md. — In the spring of 2007, a few months after Osita Otigba and his wife, Peace, moved to Balk Hill, a new subdivision then being busily developed in this picturesque Washington, D.C., suburb, they organized their cul-de-sac’s first-ever block party.

A Nigerian immigrant who runs an executive car service, Otigba learned over burgers and potato salad that his new neighbors, all of them black, included a White House staffer, a Grammy-winning producer, a lawyer, a nurse, an engineer and a fellow business owner. That’s an impressive lineup in most any community, but here in Prince George’s County, the most affluent majority-black county in the United States, the Otigbas and their neighbors were just part of the wave of well-to-do families who arrived in the years before the financial collapse to stake their claim on a 5,000-square-foot version of the American dream.

Outside the cul-de-sac’s seven brandy-colored brick neocolonials, party conversation quickly turned to typical middle-class concerns, from the quality of area schools to guidelines for the local homeowners association. By the time the Otigbas cleaned up and helped the hired DJ pack his equipment, several of their new neighbors had made something else clear. Most planned to spend the coming decades living in Balk Hill.

“I found that refreshing,” said Otigba, 43. “When we moved here, I told my wife, ‘This is it. I’m never moving again.’ We were planting our roots.”

That was then. Today, the Otigbas and five of their six immediate neighbors are underwater on their mortgages, that is, they owe more than their homes are worth. The lawyer’s house sits vacant after a failed short sale. The engineer fears the house he shares with his family will become unaffordable when their mortgage resets in about a year. And having attempted once unsuccessfully to cut a new deal with their bank, the Otigbas are waiting to hear the results of a second effort. For months they’ve lived in fear that an official foreclosure notice will arrive with an order to vacate.

“I am like a tree that is on the verge of being uprooted by water,” Otigba said, then sighed. “When that happens, think of all the other parts of the ecosystem that are upset, the streambeds that overflow, the problems that follow. That’s what it is like here.”

Thousands of blocks throughout the country have felt a similar pain since the housing crash, but communities occupied primarily by black and Latino families have been disproportionately battered. That the nation’s housing crisis threatens the futures even of those with the means of the Otigbas and their neighbors in this center of black affluence raises serious questions not just about government remedies for the foreclosure crisis, but about equality of economic opportunity in the United States.

“Committing to equality in mortgage lending is not as easy a concept as saying you are a great admirer of Martin Luther King or support the ideas in ‘I Have a Dream,'” said Beryl Satter, a Rutgers University-Newark historian and the author of “Family Properties: Race, Real Estate, and the Exploitation of Black Urban America.”

Many politicians, including Republican presidential contender Mitt Romney, have blamed the mortgage crisis largely on bank regulations that didn’t apply to its most infamous players. That’s a deflection, Satter said, that fails to account for the country’s entrenched legacy of discrimination.

“Institutional racism and the way businesses have taken advantage of it to make money are absolutely at the root of this crisis,” she said.

Efforts to expand the number of black and Latino homeowners have also been described as the root cause of the housing collapse. Such a conclusion is too simplistic, said Debbie Gruenstein Bocian, a senior researcher at the Center for Responsible Lending, a Washington-based think tank.

White families held mortgages on the vast majority of the roughly 4.2 million homes that have entered foreclosure since the housing bubble popped in 2006, she said. Yet since the crisis began black and Latino families have been almost three times as likely as whites to lose their homes, according to a November study by the center.

That’s largely because even minority homebuyers with good credit were often steered into high-interest loans, adjustable-rate mortgages and other risky arrangements. In December, Bank of America agreed to pay $335 million in victim compensation to black and Latino borrowers pushed into unfair deals by its notorious subsidiary, Countrywide Financial. Given judicial approval, the settlement will mark the U.S. Justice Department’s largest-ever residential fair-lending penalty for “widespread” discriminatory steering.

At the height of this shady lending, 2004 to 2008, the greater Washington area ranked among Countrywide’s top 10 targets, according to the Justice Department. The Otigbas and most of their neighbors borrowed from Countrywide.

These types of loans have reshaped life in Prince George’s County. As early as 2007, a state task force identified Prince George’s County as the epicenter of Maryland’s foreclosure crisis. County sheriff’s department data indicates that mortgages for more than 50,000 homes, roughly one in four single-family residences here, have been in default or some stage of the foreclosure process since 2006. Property values have cratered in that time, according to county officials, declining by 35 to 40 percent on average. They are expected to fall further this year.

“One of the reasons everyone should be more than a little alarmed here is that for middle-class families, whether they be black or white, housing is the primary form of wealth,” said Lawrence Mishel, an economist and president of Economic Policy Institute, a liberal Washington think tank. “When the wealth from a house is gone, everything a family has is in real jeopardy.”

Foreclosures have expanded the wealth gap between white and black households in the United States to levels unseen since the early 1980s, according to an EPI report published last September. In mid-2009, the recession’s official end, U.S. median household wealth — total assets minus debts — sat at $97,900 among white families, compared to $2,200 for black families, the report found.

“It’s like somebody opened a drain on most of the economic progress made by black families in the last 30 years,” said Mishel. “That’s three decades down the drain.”

Since 2007, the Otigbas have poured more than $215,000 into their house, which is now worth only 60 percent of what they originally paid for it. But if the family has to leave, Osita Otigba said, it’s not the money they’ll mourn.

“It’s the idea of the dream,” he said. “If you have worked, you have planned and prepared to make it real, you never, ever envision that it will not last.”