During an interview with a senior executive at the now-defunct mortgage giant, Countrywide Financial, I found myself engrossed in his life story. More interesting than his views on the subprime debacle, which simply reprised his Senate testimony, were his tales about being a working-class kid who attended college on the recommendation of a family friend. He told me about his parents’ immense pride at having saved enough money to put a down payment on a home, a satisfaction he often invoked as he described building Countrywide alongside his boss, Angelo Mozilo, whom he portrayed in similarly humble terms as an Italian butcher’s son from the Bronx.
His appeal to a familiar bootstrap mythos was striking. Here was someone who had been involved in loosening underwriting standards, unleashing a flood of high-risk lending that tore apart U.S. mortgage markets and triggered the bank seizures of fourteen million American homes, my family members’ among them. What did this meritocracy myth have to do with the highest rates of foreclosure in U.S. history?
In many ways, the story of the subprime crash begins with an aspirational ethos formed in the blue-collar, middle-class neighborhoods where the key architects of the subprime disaster grew up. Sentimental attachments to home and family, combined with post–Second World War desires for middle-class stability, helped drive the expansion of mortgaging into neighborhoods where homeowners did not otherwise qualify for loans. Emboldened by a mandate from the Clinton administration to use home ownership to “expand the American Dream,” Mozilo and his team at Countrywide touted the notion that they were offering home ownership to those once excluded. In fact, just days before the mortgage crash, a housing-justice organization had awarded my Countrywide interviewee a lifetime achievement award for his work in subprime markets.
Despite its public relations spin, lenders and speculators converted these enduring aspirations for mobility and security through home ownership into subprime loan products. Mortgage lenders managed to formalize these fantasies of the good life into adjustable-rate mortgage contracts, debt-to-income ratio algorithms, and collateralized debt obligations traded on derivative markets. Countrywide secured windfall profits by charging so-called high-risk borrowers higher interest rates and selling their subprime loans as high-grade investments to Fannie Mae and Freddie Mac in order to outsource the risks. Yet my interviewee elided the consequences of these conversions by focusing on the aspirational aspects of homeownership, a slant that also erases forms of privilege that shaped his own personal story. The successes of homeowners in the modest lower-middle-class neighborhoods he described relied on postwar government subsidies and racial privileges, advantages essentially unavailable to a new generation of homeowners with subprime loans.
Far from recognizing how affective desires and intimate attachments are converted into market speculation and profits, popular and scholarly rhetoric describing the 2008 mortgage crash tends to segregate “the economic” from “the social.” In these narratives, mortgage financialization appears as a technology-driven market force that conquers the social, colonizing and wreaking havoc upon a distinct world of family and home. This discourse typically represents the economic as a faceless, teleological outgrowth of capital accumulation while depicting the social as a domestic world of sentiment, race, and class.
This imagined opposition between the economic and the social reinvents a model of capitalism, critiqued by Bear, Ho, Tsing and Yanagisako (2015) in their manifesto, in which “the worlds of the household, kinship, and ‘non-capitalist’ institutions are radically different in their forms of sociality from the world of the market.” Likewise, I argue that the financialization of mortgaging depends on the social world. Aspirations, sentimental attachments, and the myth of upward mobility—along with the concealment of privilege—became the fodder for securitization.
Moreover, such forms of conversion and formalization do not serve financial markets alone; these processes run both ways, as homeowners facing foreclosure now convert their suffering and outrage into appeals to lenders. In the aftermath of the 2008 crash, homeowners in lower-middle-class neighborhoods are pointing to formal mortgage contracts as proof of lenders’ obligation to assist delinquent mortgagors.
Since 2012, I have been conducting research in the Sacramento Valley of California among homeowners experiencing foreclosure and the loan specialists who process their appeals. A midsized capital city, Sacramento is described by its residents as a vestige of middle-class affordability. Known for stable government jobs and high rates of neighborhood racial integration, Sacramento’s pre-crash real estate markets were fueled by families looking to trade expensive Bay Area prices for “the good life.” But beginning in 2007, mortgage defaults in Sacramento increased sixfold, placing the city in the top ten metro areas in foreclosures per capita.
Mortgagors in the Sacramento Valley expect home ownership to guarantee status and stability. While widespread foreclosures have rendered the promises of home ownership anachronistic, homeowners facing foreclosure still presume their lenders should make good on that promise by offering assistance and forbearance. Just as lenders convert clients’ aspirations into high-risk mortgage agreements, white, black, and Latino mortgagors in lower-middle-class neighborhoods formalize their own expectations into loan modification applications through which they hold lenders accountable for delinquent mortgage debt.
Not surprisingly, these conversions are often morally fraught. A high percentage of midlevel lending employees, many working in a mammoth Bank of America loan modification center on the outskirts of Sacramento, likewise subscribe to this logic of mutual responsibility for distressed mortgages. These loan modification specialists, many hailing from lower-middle-class and immigrant families, often question the legitimacy of the hundreds of thousands of foreclosures they have overseen. They report a sense of having failed to discharge their moral responsibility to homeowners, even as they continue to work in a bureaucracy that has formalized the bank seizures of millions of homes.
When I asked the Countrywide executive whom he blamed for the crash, he laughed, caught off guard. He returned to a boilerplate response that fingered Wall Street and the government, but I interrupted him. “When I ask homeowners the same question,” I said, “many blame themselves.” He paused, then replied, “Huh. Yeah, I guess we were all in it together.” He meant homeowners had played a role, but something ambiguous lingered in the silence that followed. Even as he extolled home ownership as the key to American uplift, had his role in rendering that dream obsolete become painfully clear?
Bear, Laura, Karen Ho, Anna Tsing, Sylvia Yanagisako. 2015. “Gens: A Feminist Manifesto for the Study of Capitalism.” In “Generating Capitalism,” Cultural Anthropology website, March 30.