How the banks destroyed Detroit
Published Mar 31, 2011 9:20 PM
Detroit lost 25 percent of its population in the last decade, according to the
2010 U.S. Census. (Detroit News, March 23) Detroit’s population declined
from 951,270 in 2000 to 713,777 in 2010. Detroit, an 85 percent
African-American city, experienced the greatest population loss of any U.S.
city except New Orleans.
Not one of the many newspaper articles discussing this lost population puts the
blame where it belongs — on the major banks, which have leveled
neighborhoods throughout Detroit with mass foreclosures driven by racist,
The foreclosure epidemic that has leveled communities throughout Detroit is a
direct product of the racist lending practices of every major bank. The
Michigan State Housing Development Authority published data noting 62 percent
of all mortgage loans to African Americans in metro Detroit in 2005-2007 were
subprime loans, compared to 28 percent for whites. A huge 87 percent of
African-American borrowers in Wayne County, where the city of Detroit is
located, were sold subprime loans in 2006. (Detroit News, Sept. 8, 2007)
A January 2009 report prepared by the City’s Planning and Development
Department noted that of 330,000 new mortgages in Detroit from 2004 to 2006, 73
percent were subprime mortgages (mortgages at least 3 percent above the
standard interest rate).
The report noted that from 2005 to 2009, the city experienced 67,000 bank
foreclosures, more than 20 percent of all household mortgages. In addition,
there were 4,000 tax foreclosures in the first six months of 2008. The study
noted that two-thirds of foreclosed properties were now vacant.
The foreclosures have continued in the years since this report was published.
More than 69,000 homes in the Detroit metro area received delinquency or
foreclosure notices in 2009. (foreclosuredeals.com, Feb. 9, 2010) Metro Detroit
recorded 43,541 foreclosures in 2010, the third-highest number in the U.S.
(Detroit News, Jan. 27) Last fall 13,000 tax-foreclosed properties were placed
on the auction block. (Michigan Public Radio, Sept. 17)
The banks knew these subprime loans would fail when they made them, but they
didn’t care because of the massive profits they made — until the
bubble burst, at which time the banks were bailed out by the taxpayers and
continue to be bailed out to this day. Most mortgage loans are owned or backed
by such federal government entities as Fannie Mae, Freddie Mac and the
Department of Housing and Urban Development. The federal government pays the
bank the inflated value of the mortgage and then evicts the homeowner.
Stop debt service to the banks
Detroit had the lowest foreclosure rate of any metropolitan area in the U.S. in
1996. (Black Commentator, Nov. 22, 2007) An article on Landlord Nation, April
13, 2009, reported that Detroit, a city once known for its high percentage of
home ownership for African Americans, now has the lowest ownership rate for
single family detached homes out of the 20 largest cities in the U.S. The
average sale price of homes in Detroit with HUD-backed mortgages plunged from
$46,702 in 2003 to $8,672 in 2008 and $6,035 for the first three months of
As early as March 2007, the Moratorium Now! Coalition to Stop Foreclosures,
Evictions and Utility Shutoffs pointed out to Democratic Gov. Jennifer Granholm
that she could declare a state of economic emergency under Michigan law and
place a moratorium on foreclosures based on the 1930s Mortgage Moratorium Act,
which was upheld by the Michigan and U.S. Supreme Courts. Granholm explicitly
stated, “The banks wouldn’t like it.”
The coalition similarly approached three Detroit mayors — Kwame
Kilpatrick, Kenneth Cockrel Jr. and Dave Bing — to declare a state of
emergency in Detroit and formally request the imposition of a foreclosure
moratorium for the city. Each of these politicians rejected this demand that
would have preserved Detroit’s housing and population base.
Today, with the city’s tax base destroyed by the loss of property values
caused by the foreclosure epidemic, the same banks that caused this crisis have
the audacity to demand huge cutbacks in city services and jobs in order to be
paid debt service on loans made to the city, which are continually renegotiated
as the tax base declines.
In fact, the banks exercise direct control over large sections of the city
budget, with casino tax dollars and state revenue sharing paid to trustees, so
the funds go directly to the banks. Up to 80 percent of state school aid is
earmarked for debt service to the banks. (Detroit News, April 4, 2010)
Detroit can be rebuilt and repopulated. The city needs a massive jobs program
where youth can be trained as carpenters, plumbers and electricians to rebuild
the housing stock that has been destroyed by the banks, so that vacant homes
can be returned to their rightful owners or turned over to the homeless and
unemployed. This jobs program can be paid for by placing a moratorium on debt
service to the banks, as well as collecting reparations from the banks for
destroying this once-great city.
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