Sound like a dream? Well, not quite. As The Coup's "The Repo Man Sings For You" highlights, poverty and wage inequality were still big problems in the United States. In fact, wage inequality—that is, the difference in incomes between the richest and the poorest in the country—had been rising pretty steadily since the 1970s. In other words, there were fewer people unemployed, but those who were poor were proportionally further behind the rich than ever before. In "The Repo Man…", The Coup bitterly mocks the owning class that loans, rents, leases or mortgages houses, cars, and other essentials to poor people at high interest, and then sends in the Repo Man to take it all back when people fail to make the payments. Even in 1998, some people were fed up with the difficulty of keeping up with all the payments and with the impersonal nature of the repossession process. The Repo Man is just a cog in the wheel, a representative of the bank or the credit card company, coming to take stuff that feels like it's yours—but, it turns out, technically belongs to someone else. "It's not my fault you facin' foreclosure, I told ya / I'm just an agent, workin' for the man / And his manuscript say you owe him for this land," sings the Repo Man.
Boots Riley's characteristically brainy and biting depiction of the Repo Man should remind us of some developments in slightly more recent years. After all, 1998 was hardly the height of disaster in terms of foreclosure and bad loans. Nope, that would come later—in the infamously destructive foreclosure crisis of the late 2000s. And this song, dear Shmoopers, provides a perfect set-up for us to talk about that very disaster (which we know you were longing to do).
To the non-homeowner, the word "foreclosure" itself might sound a bit intimidating and difficult to understand; forget about something as large-scale as a "foreclosure crisis." Let's start by defining a few key terms (yeah, we had to look some of these up ourselves) that we'll need to understand the housing crisis of the late 2000s:
Interest rate: That's the rate charged for the loaning of money as it is paid back over time. Interest rates may be adjusted for inflation, and some interest rates on mortgages are "adjustable," which means that they can change—and sometimes increase drastically—based on factors not always understood by the borrower. It's in the fine print.
Mortgage: A mortgage is a kind of loan, typically set up for people who want to buy a house. Mortgages are like typical loans with interest rates, but with mortgages the house itself serves as collateral (meaning, if the homeowner fails to pay the loan, the loaning bank can seize and re-sell the house).
Subprime mortgage: A subprime mortgage is a type of mortgage usually given to people with bad credit or a low income. The trouble with these loans is that they often include absurdly high interest rates, sometimes hidden in the deal as adjustable interest rates that explode a year or two into the loan payments. Subprime mortgages became more and more common from the mid-1990s into the 2000s as the lending market became more competitive and lenders struggled to get new customers. You may also hear these called "predatory loans"; they have often been marketed toward the elderly and toward poor people of color.
Default: That means you didn't pay what you owed—you "defaulted." Oops.
Foreclosure: Ah, finally, we get to the golden nugget, as it were. Foreclosure refers to the process that is kicked off when a homeowner defaults on their payments and the bank that provided the mortgage claims a legal right to repossess and re-sell the property. In about half of the fifty states, foreclosure requires judicial review—meaning, banks must prove their right to foreclosure before a judge. In the other, non-judicial states, banks can foreclose on people without going before a judge.
Okay, that was a lot of words. But let's think about these new ideas in logical order. Say you get your first mortgage. It's your first house, and since you didn't have great credit before, and you owe money here and there, you didn't think you could really afford a house. But then some guy from some bank told you he could make you an extra-good deal, and gave you this mortgage that you felt like you should take, because it might be your only chance to own a house. You're minding your business, making your payments, and living in your house. Then, boom, the interest rate goes up. Suddenly you can't afford your payments, and you realize that in the rush to get the house, you didn't read the fine print. You wish you had, because you have been the victim of predatory lending—you got the loan but now it's costing you more than you could ever afford. You struggle to make the payments, and then someone in your family gets laid off. Now the price is up, your income is down, and, yikes, DEFAULT has occurred. Next thing you know, you're in the foreclosure stage. The Repo Man is at your door, serving you papers that say the bank can take your house after you've made years of payments on it.
Beginning in the mid-2000s, stories like this happened literally by the millions. In 2009, a record three million houses were foreclosed on. The whole affair had a devastating effect on the economy as homeownership started to appear incredibly risky, banks started to appear incredibly guilty, and millions moved from ownership back to rental or homelessness. The housing market virtually froze. And there was another problem. The banks themselves, at least some of them, had done a pretty terrible job keeping track of all these mortgages and foreclosures.
This is where it gets really convoluted—and it's also where we get to the part that goes beyond "predatory lending" (often legal, if irresponsible) and into "fraud" (illegal, FYI). Basically, what happened was that all this lending had to be supported by financial institutions with money to lend. But usually, such lending actually happens through a (sometimes quite long) chain of players. You have the homeowner. Then you have the mortgage originator, the folks who give you the mortgage who you meet when you sign the paperwork. It's their responsibility to send the right paperwork to the right people to make sure the mortgage gets properly recorded. And the mortgage originator is usually backed by a much bigger institution—a large bank, say. But the cash for the mortgage isn't even really in the bank, it's in a big pool called a trust. To add another layer of confusion, banks usually place yet another intermediary institution between themselves and the trust, called "depositors." These are the people who are supposed to get the proper paperwork from the bank, who gets it from the mortgage originator, and then make sure that the trust (the place where all the money actually is) has a record of the mortgage. For the visually inclined, here's a diagram. If you're still confused, suffice it to say that anyone taking out a mortgage is diving into a sea of paperwork that passes through many hands before it touches the money in question. What's even more confusing is that the mortgages could be bought and sold by investors looking to make a buck, meaning that homeowners' mortgages can change hands, sometimes several times, making the chain even more complex and paperwork-laden.
And therein lies the big huge mess. All these investors bought up all these mortgages. Investors were happy because they thought they'd be making money. Yay! But then a lot of these mortgages, which had high or increasing interest rates, defaulted. And, yipes, those happy investors didn't want them anymore. They went to foreclose on people, and realized that in some cases, the trades on big bundles of mortgages had not been documented very well. In effect, they wanted to take people's houses, but didn't have great documentation proving that they actually had the right to do so. So, they fudged the numbers a little bit. They wrote up some new documents, or they just ignored the non-existence of necessary documents. They filed thousands of foreclosures and took back what was, well, not exactly theirs. Some institutions even had people known as "robo-signers" signing off on the foreclosure documents (which are supposed to be carefully reviewed by someone from the bank). In this story by the Washington Post, one robo-signer working for GMAC sometimes signed off on more than 10,000 foreclosures per month—that's less than a minute per foreclosure if the man worked an 8-hour day and did nothing but sign foreclosures. In essence, these investors were trying to back out of a bad investment just as quickly as they could, and they cut corners in their efforts to do so. Big, important corners. Legal corners. Hence the use of the word "fraud."
And that, dear 5-minute-foreclosure-experts, is a quick summary of all the messiness that led to the foreclosure crisis of the late 2000s. To summarize: in a snowballing catastrophe, thousands and then millions of homes went into default after subprime loans blew up in homeowners' faces. In a fit of fear and greed, banks tried to back out and foreclose fast, forging some documents and falsifying some records to make it look like they could legally remove people from their homes. Millions lost homes—a crisis unto itself. But then hundreds of thousands of these went back and challenged what they suspected were illegal or falsified foreclosures. The foreclosures continued, yes, but no one was really sure who to blame at that point. And the Repo Man started to appear a lot like the devilish character in The Coup's song: a lyin', cheatin', robo-dude who will take your stuff and not apologize for it.
In other words, maybe, just maybe, Boots Riley called it. After all, in the late 1990s, the whole subprime lending thing was really just getting underway. Things were a long way from getting as bad as they got, but those were the years when a lot of the subprime mortgages were being purchased that would come back to devastate the mid-2000s. Almost ten years after Boots' lament, a series of events plunged the country into a recession almost on par with the Great Depression. Alongside the collapse of all these mortgages and the sudden flattening of the housing market, a series of other factors coalesced to create a near-collapse in the U.S. economy itself. The unemployment rate shot from 5% at the start of 2008 to almost 8% at the start of 2009 and almost 10% at the end of 2009. The government bailed out banks big-time, only to be hit with the realization that many of these banks might have committed fraud in the mortgage market. Yikes.
Is Boots Riley of The Coup dancing around singing about how he told us so? Well, not exactly, although he does still dislike capitalism ("dislike" being a gentle choice of words; he may actually want to smash it).
So what's the solution? In 2009, at the height of the economic crisis, he said, "I think people need to democratically control the wealth. We are all in the struggle, no matter whether we are in an organization or not. We're struggling to pay the rent, pay the bills. We need to struggle collectively." Ah-ha! Just as we thought. A rapper and an unabashed socialist. This is the stuff of Bill O'Reilly's nightmares—and Dead Prez's dreams.