Cry me a River

We're told its worse if you are black.  Maybe.  I don't know.  I don't think that's true.  Even if it is true, I didn't cause it.  That's not going to stop the Washington Post from promoting the idea of institutional racism.

African Americans for decades flocked to Prince George’s County to be part of a phenomenon that has been rare in American history: a community that grew more upscale as it became more black.

The county became a national symbol of the American Dream with a black twist. Families moved into expansive new homes, with rolling lawns, nearby golf courses and, most of all, neighbors who looked like them. In the early 2000s, home prices soared — some well beyond $1 million — allowing many African Americans to build the kind of wealth their elders could only imagine.

Sounds bad doesn't it?  Poor mistreated blacks living in houses some of which cost more than a million dollars.  The article goes on to bemoan the plight of "middle class" blacks because the housing market has gone against them.  Go ahead and read the whole article but while you do I have a couple of points to keep in mind.

• Houses that cost over $250,000 are beyond the means of most white "middle class" wage earners.
• The poverty level for the lower 48 and DC for a family of four FY 2014 is $23,850.
• The lower level to enter the middle class is apx $65,000 per year.
• The housing case study in the article involves a house with a mortgage of $560,000.
• We are not told the income of the homeowners
• We are told they had mortgage that had some sort of ARM or initial low payment feature that increased over time
• Assuming traditional mortgage underwriting criteria (what most white people have to do) 80/20 LTV, 360 pmts, normal DTI ratio etc purchase should have looked like this:
• Purchase price $700,000
• Interest rate 6%
• Payment based on a 30 year loan = $3,357 not including taxes and insurance
• I'm guessing the monthly taxes and insurance are about $800 making the monthly housing "nut" $4,157, give or take.
• The rules for white people are:
• 28% DTI housing ratio, meaning no more than 28% of the families income should be tied up in housing.
• 35% Total DTI ratio, meaning no more than 35% of a families income should be used to service all debts including the house.
• This means the family should have had a monthly income of not less than $14,846 with no more than $5196 in total debt pmts including the house, if they were white.
• Another typical rule is to not pay more than 2.5 times for your house what you make in a year, assuming they were held to that rule they should have had an income of not less than $280,000 per year.

We know from reading the article that none of the minimum standards that white people would have had to met were required of the black couple.  We know that because when the mortgage payment shot up to $3,900 they couldn't handle it.  Had they been held to whitys standard they would have been paying more from the start.  If you are making $178,000 a year (minimum amount required to have the payment) or $280,000 a year based on the 2.5 rule, why would a $3,900 payment even phase them?

Of course none of what is considered "normal" applies in this case study, because what really happened is they bought the house on a high LTV loan paying only $20,000 down and then as the value of the house increased they used the property like an ATM machine until it came time to start paying the mortgage down which they didn't want to do because it was hampering their spending.  So due to irresponsible behavior on their part the lender moved to fully amortize the loan.  Too bad, so sad, and not a racial thing its an irresponsible thing.

One housing related point, this is an all black community for rich DC area blacks.  Blacks are only 13% of the population and they live all over the US.  That means there aren't that many rich blacks to bid up the price of the houses in the community.  Besides not all blacks who make good money are dumb enough to spend more than they can afford, or buy expensive houses to show off.

According to the article Mrs. Bryant is employed as a supervisor in the federal workforce.  Which explains some other things.