Black Folks, Real Estate As "Inter-Generational Wealth" And Commissioned Sales People Who Are Attempting To Increase Their Own "Inter-Generational Wealth"

(All of these points in this post are true and told from my life experience)

Almost 20 years ago as a recent transplant into metro-Atlanta I was employed as an independent contractor for a company that worked as a sales agent on behalf of a commercial credit card processing company.
We sold credit card terminals to local retail establishments, allowing them to accept credit cards from their customers.   This was a 100% commissioned sales job.

The two key indexes for my commission check was:

• The terms of financing for the credit card terminal
• The "points" that we charged each individual client for processing each transaction

I don't recall how much we sold the terminals for since it was so long ago.  The option was for the customer to buy the terminal outright or to finance it.   The longer the term of finance - the larger my commission would be.

The "points" were far more lucrative.   This is the amount of transaction fees charged by the credit card processor.   (Again from memory) A standard rate was 1.5%.   If we got someone to agree to 4% this was a bonanza for our commission checks.  The creditworthiness of the store's owner set the lower range but the commissioned sales person could "up-sell" the customer if they did not know that they could obtain a better rate.  We were asked to see the store's financial statement in order to get an idea of the annual sales.  The rate offered and my resulting commission check were both determined based on the estimated total value of transactions that would be processed for the next 2 or 3 years (IIRC).  

OF COURSE I had a vested interest to "close" each opportunity with the highest rate possible.
Keep in mind that this is different from the "maximum rate available".   The customer had a breaking point at which they would tell us to "Get the hell out of my store" if the rate and equipment financing was beyond what was agreeable to them.   Summary - In today's world RACISM is not going to compel a commission sales person to offer a pattern of low rates to those that he favors for their race. 

From the retail customer's perspective their desperation to be able to accept credit cards and not just cash was the motivating factor upon which we could key upon.

I left this job after about 6 months of trying to make a living.  Computers and technology was my stronger base of expertise.  This was more or less a job to tide me over until I found something better.

I have been in sales/consulting related businesses for 20 years since this time.  I understand how sales people are seeking to maximize their interests in making money and retaining a good relationship with their customers (note - some sales are one time deals rather than a continuing relationship).

When I hear that "Black people were offered higher rates than Whites" I hear two possible actions:

• White people were offered lower rates purposely
• Black people were offered higher rates purposely

Short of having an intimate relationship with the targeted customer - no commissioned sales person is motivated to sell low.   In addition - if a cluster of customers are affiliated with a group or club through which they can get group discounts - this is also a source of favorable rates.

It is my opinion, outside looking in - that Countrywide Mortgage did the later of the two bullet points.   The news that "Blacks who had similar credit scores as Whites were given a higher rate" is likely due to UP-SELLING.

If we roll back the clock to approximately 2004 the amount of solicitation for mortgage loans filled my mailbox.  In addition roving mortgage loan brokers would solicit people in mall parking lots, offering them refinancing.   

In listening to the Bank Of America/Countrywide settlement I believe that they prosecuted this case from the perspective of "Disparate Outcomes".  The US Justice Department took the customer roles of the bank and sorted them by race, income and credit rating - and from this they saw disparities.  

If you look at how "Countrywide Bank" was a branch base system in which their mortgage brokers worked out of a community branch - each of these branches dealt with a clientele specific to the environment.  

A branch in North Philly is going to attract a collection of customers that is different from the branch in the suburban city of Limerick PA.   If the US Justice Department inspected the North Philly branch by itself the data set and resulting statistics would be different from Limerick AND the combined data of N. Philly and Limerick together (and/or the national set of customers).

I would like to know how a Black person who was serviced out of the Limerick office was treated with regards to the APR that he was offered.    Just as I argue in the "Criminal Justice System" that a court system in the suburbs will likely apply local prosecutorial temperament to defendants - White and Black - the same is the case with Countrywide.    Even though we should expect that Countrywide has a stronger ability to enforce national standards upon the policies and behavior of their agents in their branches - the local realities still trump any national standardization efforts about marginal issues like rate assignment.

Short of Countrywide (and other banks) defining hard and fast rules in which a person with a specific credit rating and income is provided with a predetermined rate (ie: "retail pricing") the indictment against Countrywide for "racially significant differences in terms" will continue.   

I should also note that back in the mid-1990's "BankSouth" got into trouble with the local Civil Rights Pharisees.  In Dekalb County Georgia there was a charge that "subprime mortgages" were being offered to Black areas.   The bank offered to have all borrowers in these high risk areas (from their perspective) to go to a mandatory financial management class prior to being accepted for a home loan.  Charges of racism were lobbied and the bank was forced to withdraw this plan as they did not force customers in other areas to take the course.

Ironically - this removal of the education component actually exposed the people who have a "retail consciousness" to future exploitation.   Those who are inclined to take the price that they are told, without knowing how to shop the market and that "everything is negotiable" are inclined to fall prey to the mortgage branch that is assigned to their community.

I should add that the state of Georgia, a few years later, added a financial education program to some mortgage reform legislation that they passed.  This time the Civil Rights Pharisees were on board because it was a more widespread mandate. 

I refinanced my mortgage this past summer.   After years of watching customers who drive a hard bargain I did not take the first set of terms that were offered to me.  I told the broker to run the numbers again because I had received better terms from a competitor (I was lying).   From this I shaved a few points off of the original quote.  

The Real Theft Of Intergenerational Wealth

Though this settlement with Bank Of America will be seen as "Government Regulation Now Back On The Side Of The Consumer" - the truth is that absent more fundamental education of the consumer, awareness that they need to shop the market AND greater use of the research tools (ie: The Internet) - these showcase "perp walks" won't dramatically change anything regarding the "wealth gap" between segments of our population.

The greater threat to the Black community today is the precipitous loss of home values that is currently underway in certain communities. 

Last night my good friend told me that his $110,000 house from the year 1993 was later refinanced about 4 years ago for $225,000 by he and his wife.   They later divorced but he kept the original house.  He recently short-sold the house for $48,000.   

The popular political discourse (heard on "Black Wing Talk Radio" ) is that THE BANK STOLE the $177,000 spread between the mortgage and the ultimate short-sale price.    This is a preposterous charge.

The more accurate statement is that my friend and his former wife took $115,000 in cash out of their house and used it for consumer purposes. 

Beyond their specific case the rise and fall of the "Hidden Hills" subdivision should be written in a book one day.  This once proud "golf and tennis" community is now a poster child for the aggregate loss in "Intergenerational Wealth".  While most communities around the nation have suffered losses in property values - in places like this the bottom has fallen out.   

This was never a "ghetto community".  This was a solid middle class Black community full of Black white collar professionals and their families.   The erosion in property values and the higher than average home vacancies have dramatically impacted the county's cash flow from property taxes.

The exclusive indictment of the banks and the belief that government regulation is going to cure everything provides more false hope for the future.

A greater problem is that my friend's $115,000 in "cash out" refinancing of the house was injected into the consumer economy, no doubt purchasing a disproportionate number of items that were made in China.

I am guilty as well of seeking to retain my desired standard of living using credit that someone else profits from the interest paid for use of their money.

The ultimate solution will need to start by changing the consumer behavior of people, leveraging wealth for more targeted uplift and less for the purchase of creature comforts.