Banksters are Buying Baltimore’s Debt, Hiking Interest then Taking Families’ Homes*
By Alice Ollstein
The death of Freddie Gray in police custody in Baltimore and the ensuing protests brought the nation’s attention to the economic devastation that continues to grip the city. Now, new data shows powerful hedge funds are profiting off of struggling families in Baltimore by buying up debts as small as $250, charging high interest rates, and taking their homes when they fail to pay.
A report just released by the research and advocacy group HedgeClippers documents how the Wall Street hedge fund Fortress Investment Group and the Los Angeles-based Imperial Capital bought up hundreds of these small liens this year — on everything from unpaid water bills to delinquent property taxes — and could take property worth tens of millions of dollars if the families can’t pay.
Once the hedge funds buy up these small debts, they reap an 18% interest, according to the Baltimore-based research group The Abell Foundation. More fees pile up after four months, and if the families can’t pay, they lose their homes. An analysis of those impacted in 2014 found the families had been living in their homes an average of 21 years. Half were elderly, more than a third were disabled, and the majority were African American.
State Delegate Cory McCray, a Democrat who grew up in and represents Baltimore, told ThinkProgress he has gotten a handful of phone calls this year from constituents on the cusp of losing their home over an unpaid water bill.
“The city needs a way to recoup its money, but they shouldn’t take someone’s home for that small amount,” he said.
“Your house is your wealth that you pass on to the next generation. We have to protect that.”
McCray and other lawmakers recently passed a bill to raise the amount that would trigger a lien from $250 to $500, which he emphasized is still an unfairly low amount over which to lose a home that could be worth hundreds of thousands. He added that when at-risk families reach out to the city, they can find an affordable payment plan “99% of the time” and a foreclosure only happens “under dire circumstances.”
But the city continues to have one of the highest foreclosure rates in the nation, and the impact has been most severe in communities of colour. Baltimore now has the ironic problem of both a growing homeless population and a growing stock of vacant and often dilapidated homes.
The Abell Foundation recommends raising the threshold to $1,000, noting that neighboring D.C. waits until residents owe at least $2,500. They also emphasize that the vast majority of the money extracted from residents by these hard policies go to the hedge funds and other investors, not the city.
The hedge funds reaping these profits in Baltimore are also major donors in national elections.
Imperial Capital’s directors have lavished money on Mitt Romney and other Republican candidates in past races. This year, Several employees of the Fortress Investment Group gave the maximum legal amount to Hillary Clinton’s campaign, and its director Michael Novogratz has poured hundreds of thousands of dollars into backing Robert Menendez (D-NJ), Charles Schumer (D-NY), and other Democrats in congressional races over the past few years.
Clinton, a beneficiary of the hedge fund’s generosity, recently said in a speech about Baltimore’s woes:
“Let’s take on the broader inequities in our society. You can’t separate out the unrest we see in the streets from the cycles of poverty and despair that hollow out those neighborhoods.” Thinking back to the beginning of her career as a lawyer at the Children’s Defense Fund, she added, “Our legal system can be and all too often is stacked against those who have the least power, who are the most vulnerable.”