Tuesday, October 06, 2009


Some folks believe the "Community Reinvestment Act", or the perversion of said act, helped create the mortgage/lending/housing/banking crisis - others say the CRA had nothing to do with it. As always, just depends on if you lean right or left as to who you want to blame.

Although the big boys, Bank of America, JP Morgan, Meridian, etc. received "outstanding" ratings for their participation with the CRA - they claim they had nothing to do with making loans to high risk customers. No sirreeee. And the activist superheroes who push the CRA also had nothing to do with any crisis either - they seek only to do good for the huddled masses.

Community redevelopment is a noble profession, and it pays well, skims well. What exactly does community reinvestment mean, have you seen such a thing in your neighborhood? Shouldn't America by now be filled with shiny renewed communities after 3 decades of reinvesting billions in them?

Here's what I have witnessed in our 'hood. The city rulers, all white with the one educated black man, receive funds from the feds, sometimes trickled funds from the state who received them from the feds and trickles them to the county who trickles them to the town level, sometimes "grants" via feds, state, county, town trickles - or any order thereof, there's so much trickling and tickling and granting and agencies and acts - it's headachey trying to keep track of who is doing who.

Anyhoo, the city fathers partner with a black community nonprofit nongovernmental group to set up office to help low-income blacks attain the American Dream here in Pofunk Heights. There was no such community black group so the city council with the one educated black man scour the 'hood to find a couple or three who can open an office - name it with something that includes "Institute" in the title. The word 'institute' can sound high-minded as in Carnegie Institute, or crazy as in the County Institute for the Criminally Insane.

Part of the community reinvestment monies will go into office space, equipment, overhead, and salaries for a Director, a secretary, etc., for the Institute, hired from the more stable members of the minority community who aren't busy, i.e. don't have a life. A board of directors will be found - 6 of them, 2 old scammers from the 'hood, 2 educated black women who live on the white side of town, and 2 guys who I swear were dragged in from the corner craps game.

The local "Institute" is/was run by Mr. R., a married Vietnam vet receiving a lifetime PTSD disability check while also working full time and retiring from the local utility plant with pension; he's also a part-time preacher with his hand in the collection plate and his pants on the bedpost of the deacon's wife. He hired his daughter Nina as secretary. She never questioned the Institute's credit card bills with his charges for a Harley motorcycle and 6 laptops. They were gonna do good deeds - put black folk in their own homes. Pat their own backs, what's a little harmless cycle on the side ... hehehehe jokes Mr. R. fat belly heaving, puffing on a cigar.

Mr. R. and Nina. Between the 2 of them they embezzled close to a million. Hehehehe. Mr. R. built a new home, not on the minority side of town, but over with the white folks - and now drives a new Hummer and his wife a new Explorer. He also now owns 3 rental properties on the minority side of town. Yes, community reinvestment worked well for Mr. R. Not so well for Nina - she bought lots of clothes and took trips but when the Institute began to go broke and rumors of an audit circulated, she left town. Mr. R. washed his hands of the situation - he didn't do nuttin' wrong, ain't gonna blame him for this mess.

But I digress. Next - buy the 20 unit abandoned housing project on the minority side of town - it's structurally sound, brick. Refurbish and resell to minority or low income homeowner wannabees.

Hire contractors - all local white boys because the two black contractors are not licensed or really competent; they have made a good income working for the local slum lords (black and white slum lords here) - you don't have to know what you're doing to fix things for slumlords. The city and the bank holding the funds of course get their percentage in administrative fees, permits, etc. etc. Who owned the abandoned projects? Well, the bank, and who are members of the banking community here - yep, the city council (except the one black man). And who were the project managers, you get the idea.

The "Institute" opens the door and holds "credit classes." Sifting through the wrecked credit history of every black man, woman, and child over 18 in the 'hood. Pickings are slim, very slim. Most potential home buyers are female as most grown black men are in prison, on parole, out on bail, still living with mama, or terminally unemployed.

Many of the women are disqualified as they're too old raising too many grandbabies and have transient family members who occasionally need a place to flop - the homes will only have 2-3 bedrooms and the city will be enforcing zoning laws about how many can live in a single family dwelling - the city won't really enforce anything because we have a lady down the street in a 2 bedroom house with a dozen or more people running in and out - but the city will initially pretend it's going to abide by the law - besides, just put down on paper it's you and a couple of others, and the rest can move in when you do.

Damn hard to find young working minority couples here, and those stable minority couples with jobs are not going to live in that section of homes on that side of town.

Damn hard to find low-income minorities here who even want to own a home. I mean, the self-appointed do-good "left and progressive" benefactors have been telling you for decades that the American Dream is nothing more than greedy white folks capitalist b.s. ... now they want you to buy a piece of the b.s. in one of their programs?

Okay, so the "Institute" and city fathers will put single working mom in these homes (and her new boyfriend). Just have to counsel them on cleaning up the credit scores. Pay off those old phone bills, heating bills, low-limit credit card bills, etc. And after those are settled, pay off or deal with the really old ones that mama made when you were 10 and put her phone and utility bills in your name.

So now we are down to maybe a dozen who could eventually qualify for a home loan - and that's stretching and bending the qualifications to fit just about anyone who can show up at the closing to sign. After all, these homes will sell for maybe $20k and with the new and lax rules of no down payment, low credit scores, and limited work history and enough fudge - voile, the community will have reinvested in the American Dream. Jaqueeta and Shaniqua are homeowners. As are born-again "Track" and the couple from out of town who are unaware of what they've bought into. The "Institute" even managed to slide in a couple of grandmothers and their gang of descendants.

Although a home in the new named "Pine Oak" section is valued at a mere $20k I'm certain when the trickling and activism at every level is accounted for - each one is a million dollar home.

Oops, forgot to tell the homeowners there's such a thing as regular home maintenance, general repairs, yard work, new landscape rules to live by (dead washing machines and parked cars in the yard are not allowed). Insurance, taxes, 'fraid so. And when the city wants to pave the alley, do you know who has to pay your portion? Yep, cough it up.

Guess what!

For sale - must see, refurbished project suitable for single family dwellings, priced to sell. Great income investment opportunity. Won't last. Contact First Frivolous Bank or R.U. Insane Community Institute.


Anonymous said...

This article is so funny, I actually laughed out loud. It must ring true in a lot of ways.

Anonymous said...

Then there's the bit about the reverse mortgages that they sold to the elder black homeowners, who they then tricked into purchasing all manner of home improvements, leaving homeowners with no equity in no time flat.

I lived in such a community, bypassing the institute's "help", but sold out when the only way to afford the rising taxes, insurance, repair costs, etc, was to refinance (wages were stagnant).


Kate-A said...

Anon - sad but too true in too many ways.

Kathy -
Reverse mortgages I believe were big with HUD/FHA and the deal made payments to the home owner as long as it was his/her residence, the government's "home equity conversion." The home had to be free and clear or would be with part of the equity conversion funds paying it off. It was paid back when and if the owner/estate sold the home. All supposedly to give the owner more financial security - which it may have for those who used it correctly and wisely.

I have a problem with "tricked" as that is a too oft used excuse. Young or old, rich or poor, a little research on the net or at the library costs nothing. I know several homeowners who took equity for improvements, mainly for luxury (sauna, hottubs, pool) and some who used the money for exotic vacations, new cars, etc. Most people seem unrealistic or short-sighted when it comes to their own economic life.

My FIL told us years ago anyone buying a home needs at least 6 months of wages saved for emergencies, hard time, inflation, recession, and mother nature - just in case - and then buy under what you think you can afford.

I was thinking the other day about our first "starter home" and wonder if they even have those anymore. The cutest little 2 bedroom cottage with patio and landscaping - all of maybe 600 sq. feet, an elderly couple had spent 30 years in it, she had a green thumb and he was a carpenter, greatest little nooks and crannies for storage and useful things that folded in and out of the walls. Much too small for the 5 of us but it was all we could afford. Good thing, as we hit the recession of the '70s, wages froze, layoffs, much worse than today. I think we called it "stagflation" back then. We all have good memories of that little house and drive by to see it when we're in the area, still in touch with the couple across the street.

Maybe you have or can buy again. Only 1 of our 5 kids has had to sell low and move, and I saw that coming when they bought a few years ago. They had so much money coming in, her executive income, etc. and were living large. They've landed on both feet, broke my heart as I think it may have been a bit humiliating, but a humble lesson.

I don't think economics are much worse today than the '70s or '80s - it's TPTB shaking out the ones who can't hold on, which they seem to do every 30 years mas or menos. Hanging on can be a bitch though - although our kids never seemed to notice back then, they thought 3 beds in their room was like the 3 bears story, and me pulling groceries home in their little red wagon was cool.

Anonymous said...

For the longest, I have preferred apartments because I like to be able to take off at a moments notices and move somewhere else if I like. A house just seemed like it would be too cumbersome and impede my freedom with the logistics involved in the upkeep and sale of one.

I must admit, suddenly apartments have lost their allure for me and I would like a house with enough land for a garden and fruit trees. Guess I will start looking around. I will be sure and do my research and have about six months savings. Actually, I like the idea of just saving and saving and saving and paying cash. Or at least have the cash in a trust to make the payment to retain the tax benefits, if there are any left.

Kate-A said...

Some of the best deals I've seen are those bought directly from the owner. Large downpayment, owner carry for 5-10 years at a really low interest rate. I know a woman who did that and will have her house paid for around the same time she retires at 65. The couple she bought from retired to Arizona and her monthly payments are regular income for them.

I know a few folks who have bought on a sort of "rent to own" with the entire monthly payment going toward the mortgage - they maintain and pay for any repairs and the owner pays property taxes and insurance and gets the tax write off - until the contract is paid off in 10 years.

All have signed and notarized contract, no banks, realtors, or middle men.

I think if people look hard and are creative they can find some deals that are good for everyone involved.

All done without government or bureaucracy. :)

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