The city may not be able to prove that Wells Fargo targeted African Americans for risky mortgages during the housing bubble, but Phyllis Betts can show they've been most directly hit by the ensuing foreclosure crisis.
Memphis is currently suing Wells Fargo, alleging it engaged in predatory lending practices, so-called reverse redlining, that ultimately damaged property values in the city.
Last week, Betts — the U of M sociologist whose research on Section 8 rentals was part of a 2008 Atlantic magazine piece about rising crime — presented a sobering look at the foreclosure crisis during two Livable Memphis forums.
As part of a series of studies done in conjunction with Livable Memphis and the U of M's Center for Community Building and Neighborhood Action (CBANA), Betts pointed to an erosion of local home ownership, a decrease in subprime lending, and a disparate impact on aspiring homeowners, particularly minorities.
"We've been dealing with this for the past four years," Betts says. "We have enough info from 2008 to document where we're going."
Over the last 10 years, Shelby County has lost almost 50,000 residents. But even that number doesn't fully explain the drop in homeowners and households over the last few years.
"The population loss isn't nearly enough to account for the decline in the number of homeowners," Betts says.
Since 2005, Memphis and Shelby County have lost 17,000 and 7,500 households respectively, due to foreclosure and the subsequent credit crunch. The result is people "doubling up" and moving in with family or friends.
"Households buy stuff," Betts says. "There's an economic impact just on the furniture."
And in the post-subprime world, new households aren't being created to replace them. Home sales are stagnant. Investors are driving the market in many areas. Loans to low- and moderate-income buyers, African-American buyers, and female-headed households are all down.
More than half of all 2008 Shelby County mortgage applications were from minority applicants, but only 32 percent of all the loans originated that year were awarded to minority applicants.
Put another way: During the housing boom of 2005, 58 percent of black applicants were approved for loans while 77 percent of white applicants were. Three years later, in the midst of the meltdown, almost the same percent of white applicants (74 percent) were approved while only 43 percent of their black applicants were.
"The financial sector's answer to that gap is credit history," Betts says.
In 2008, 37 percent of black applicants were denied loans based on their credit history. Twenty-three percent of white applicants were denied because of credit history, with slightly more white applicants being denied because of a lack of collateral.
The world of foreclosures is a murky one. To compile its findings, CBANA staff used data gleaned from the Home Mortgage Disclosure Act, the Register of Deeds, the Memphis Daily News and Chandler Reports, its own on-the-ground Neighborhood by Neighbor survey, HUD market reports, the U.S. census, and the IRS.
However, credit history isn't available from any of those sources, so there's no way to verify the credit history problems.
Whatever the reason, the end result is the higher the African-American population in a neighborhood, the greater likelihood that the applicants will be African American and the greater likelihood that the neighborhood is not seeing significant re-investment in home ownership.
"Shedding homeowners means vacancies in single-family homes in a growing number of neighborhoods. ... Knowing the numbers should convince us how serious the trend is and motivate us to intervene now with new ways of restoring home ownership, especially for black families," Betts says. "They are a big part of the potential market."
But if potential residents aren't buying houses, what's happening to them?
In a number of zip codes — 38108, 38111, 38126, and 38114 — more than 75 percent of the homes foreclosed on in 2008 are now owned by investors. In others such as 38106 and 38112, more than 60 percent of foreclosures were sold to investors.
The combination of rental homes and vacant property makes foreclosures the predominant cause of blight in vulnerable neighborhoods, validating at least part of the city's suit against Wells Fargo.
Given the preponderance of the data, it might appear that Memphis is not in a great place. But Betts says that's not the case.
"Many neighborhoods still look better than many cities with high poverty rates, and crime is coming down," she says. "We are not Detroit, where a third of the urban land is vacant. We will more likely just limp along and continue to bemoan migration to DeSoto and Fayette counties without becoming an in-your-face urban desert.
"But we can do more to restore our neighborhoods and reclaim the price of living in the City of Good Abode."
For more on this and other topics, visit Mary Cashiola's "In the Bluff" blog at