Neither borrower nor renter be: America’s coming foreclosures

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Hello and welcome to the Intelligence from the Economist. I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. The Netherlands colonial past is often overlooked, built as it was on staggering amounts of slave labor. A new exhibition tackles that history head on, despite the fact that enslaved people didn't have many belongings to leave behind. And if you know about Marmite, a salty, gooey spread most famous in Britain, you know that it's a love it or hate it proposition. Or at least you've been told it is. We look back on a daring 1990s advertising campaign that's still helping to sell the stuff. First up, though, America's economy is now back where it was before the pandemic, according to data released this week.

Breaking news in the US Economy grew.

At its fastest pace since last fall.

The government gross domestic product, or GDP, grew at a 6.5% annualized rate in.

The March to June period.

So we're seeing the recovery plus play out in these numbers every quarter.

From inflation to jobs to housing prices, other economic indicators are also moving at pace. But one measure has been relatively stagnant foreclosures. For the past 18 months, American homeowners unable to keep up with mortgage payments could stay in their homes thanks to a federal foreclosure moratorium put in place in the pandemic's early days, renters, too, were protected from eviction. But both of those stopgap provisions are set to expire tomorrow. Yesterday, President Joe Biden asked Congress to extend the eviction moratorium, but that is looking unlikely, meaning that there are now almost 5 million people in fear of losing their homes over the next two months.

A colleague and I recently visited Miami, which, like much of America, is experiencing an incredible boom in its housing market.

Alice Fullwood is the Economist's Wall street correspondent.

House prices are up 20% year on year. But at the same time, almost 8% of mortgage holders in Miami are behind on their mortgage payments, which is the highest rate of any metro area in America. And this is coming to a crunch point because moratoriums on foreclosures are ending this weekend on July 31st. And this raises the prospect that you could see a spike in people losing their houses as this other part of the housing market is going through a boom.

And so how bad could that disparity be? I mean, how many people are struggling at the moment?

So for homeowners, there are two ways to think about this. One is the delinquency rates. Nationwide, about 6% of mortgage holders are delinquent on their mortgages, and just over 4% are seriously delinquent. So they haven't been able to pay their mortgage for more than three months. And ordinarily, they would be facing imminent foreclosure. There's also a survey done by the Census Bureau, and around one in 10 mortgage holders, holders have little to no confidence that they'll be able to pay their bills next month. Almost one in four renters also have no confidence in their ability to pay. And that means that in total, it implies that around 2 million households are at risk. They're behind on their mortgages, they don't think they'll be able to pay, or they're in one of those delinquent categories. And the nature of those households is that they are more likely to be black and Hispanic, they're more likely to be poor, and they're more likely to have children than average. I did speak with one mortgage lawyer in Miami, Daryl Jones, and he thinks that it's kind of inevitable that this will translate into an increase in foreclosures in the coming months.

Well, there's certainly going to be a spike in foreclosures. I don't think there's any way to prevent that from happening with the number of people who are behind on their mortgages in South Florida and Florida as a whole, you literally can't prevent it now.

And the relief packages that are coming to an end. What are the details? What support had homeowners been able to count on?

There were two policies that were in place to protect homeowners during the pandemic. The first was a moratorium on foreclosures, which essentially banned banks from foreclosing on people. And the second was pandemic related forbearance. So it allows you to postpone payments. And during this time, borrowers have had up to 18 months of forbearance. In combination, these two types of protection have been unbelievably effective at stopping foreclosures. Essentially, lenders repossess just 7,000 properties in the first quarter of 2021, which is about 90% less than in a normal period.

And you mentioned that renters are also at risk. Where do they fit in here?

Renters were also protected by a federal moratorium on evictions, which also rolls off on July 31. The protections for renters have not been nearly as watertight as they have been for homeowners. The level of support is really depended on what happened at a state and a local level. The moratorium, moratorium at the federal level was quite filled with holes. For example, you couldn't evict people for failing to pay their rent, but landlords could evict you for basically any other reason, such as your lease expired, which has happened to a lot of people, because the pandemic has gone on for 18 months, or noise complaints, or any trivial other problems like that. So there was one study done by the Government Accountability Office, which found that those with local moratoriums on evictions saw them drop much, much more significantly. Evictions are at just a tenth of their normal level. But in areas where there was only the federal moratorium, evictions quite quickly climbed back up to 80%. Miami, for example, as a case study, had no strict eviction moratorium of its own. And so just under a thousand eviction cases have been filed every month since January, which is about two thirds of the normal level.

So given all of that, then what's your prediction for the coming months?

It's quite a complicated prediction, essentially because renters haven't been that well protected by the federal moratoriums. You wouldn't necessarily expect that the lifting of that federal moratorium will necessarily cause a sort of huge wave in evictions. Having said that, there are a lot of people who seem to be struggling with their rent and say that they're behind. So I also don't feel confident that there won't be any all out. As for foreclosures, although the moratorium lifts on July 31, that forbearance protection will roll off more slowly over the next six or seven months. So rather than this immediate spike on August 1st, you might see a slower cresting wave. And how big that wave is and how bad it gets really depends on the choices that homeowners make. Because unlike last and worst foreclosure crisis that America has experienced, the situation now is very different than it was during the global financial crisis.

In what sense? In relation to that hot housing market you were describing.

Most mortgage borrowers, the debt that they owe on their house will be less than the value of that home, probably because it's gone up in price, especially over the last year. So rather than waiting and being foreclosed upon, homeowners might be able to sell and walk away with a profit. They also might be able to catch up on their mortgage payments if they're behind because you have jobs growth, unlike in 2008, 9, 10, and finally, people might try to get mortgage modifications when you tack missed payments onto the end of a mortgage. And it allows people to stay in their home if they want, if the bank is willing to grant it. So adding all of these dynamics together is quite tricky. But the people that I spoke to in Miami, for example, Daryl Jones, think that there will be a spike. In 2010, there were 66,000 foreclosures in Miami Dade County. There are around 5 to 10,000 in a typical year. And he expects that you'll see a spike to between 30 and 40,000 in the year from September 2021. So a very significant climb, even if not quite as bad as during the worst foreclosure crisis in history.

Okay, but better than the worst in memory is still not good.

Every foreclosure is tragic. And people who end up in this position and try to get modifications and it doesn't work out, there's this huge emotional toll. I spoke to one former homeowner, Keith Simpson, and after a long legal process and trying to get a modification, he was foreclosed upon in 2018 from a home in Miami that he and his wife bought in 1998.

We got totally wiped out. All our equity from the house is gone. You know, $300,000 or more, we've lost that.

And now they're renting.

You know, the snowball effect was incredible. And so, you know, at almost 65 years old, we're starting over pretty much.

So even if the foreclosure crisis isn't as bad as that terrible worst in history, one a spike would still be a tragic event for the thousands and potentially millions of homeowners that would suffer as a result.

Alice, thanks very much for your time.

Thank you, Jason.

Alice also spoke this week with colleagues on Money Talks, our sister show on business and finance. She's been tracking the public listing of Robinhood. It's a no fees stock buying platform that's made it easy for amateurs and day traders to move markets and rattle the big hedge funds. Look for Money Talks from your most trusted broker. From Suriname in South America to Indonesia, from South Africa to Curacao in the Caribbean, the Netherlands had a colonial footprint across the globe. The country's 17th century riches came in part from coffee, sugar and spice plantations, all the product of slave labor. That Dutch golden age of great painters and inventors, historians and publishers. Many of them were among the world's leading slavers. The plantation's bells could for the slaves, be relief or omen, marking the end of a day and the weighing of the harvest or the start of a beating if the wait fell short. Today, the sounds of those bells can be heard at the Rijksmuseum, the Dutch national Museum of Art and History, part of an exhibition to shed light on a colonial past many would rather forget. But finding objects to tell those tales was no easy task.

So one of the things that's really difficult with doing an exhibition about slavery is that slaves don't have very much stu.

Matt Steinglass is a Europe correspondent for the Economist.

When I talked to Velika Smulders, who's the chief historian of the Rijksmuseum, she said that was a big challenge for this exhibition.

People who were enslaved were not allowed to have objects. They were not allowed to write. They were hardly ever depicted, portrayed.

And they addressed that in a few ways. One was just going on a giant quest for objects from the slave economy. They found old objects with the logo of the Dutch West India, which says GWC for Octoire de Vest Indische Compagnie, which is a very charming old logo that you'll see on the stoops of houses in Dutch ports. But it feels much less nostalgic when you've seen it on a branding iron that was used on people.

So even though there was this dearth of physical stuff, you think the exhibition gives a good picture of enslaved people?

I thought it was incredibly powerful. It's difficult to get the words, obviously, of people who died 150 or 250 years ago, and who weren't allowed to write or leave testimony themselves. But we have those people's direct testimony in certain documents, such as interrogation documents. When they were put on trial, There was a slave named wali, who they trace, who ran away in the early 1700s from a plantation in suriname and was then gruesomely executed after a trial. But the testimony that he gives is just gripping and gives you a real picture of some of the disciplinary tensions and the tensions over rights and work habits on plantation plantations. They also get some songs, oral history. These songs have been passed down through generations, and you can still hear them in Suriname, Koracao and south Africa. It sounds sort of like a lullaby, But what they're actually saying is, the landlord sells us mama slaves are chickens. They have recordings from 1958 of a woman who was then 105 years old, named machici, who was born into slavery in curacao. She was 10 years old when it was abolished. She says there were still slaves all over the place when she was young and that her grandmother taught her that she was equal to anyone, didn't have to be ashamed of that past. She recites this song that goes, no more yolk. The yolk is over. I don't wash plates anymore.

And so in that sense, this is not your standard issue Rijksmuseum exhibit.

Yeah, it's a real departure for the rijksmuseum. And they've also had to look back through their own collection, Trying to find traces of black people in the netherlands, Trying to find traces of slavery in paintings that had never been looked at in that way before. They have a pair of well known portraits by Rembrandt of some very rich young newlyweds in Amsterdam. What people haven't thought about is the fact that much of their wealth came from the sugar trade, which was driven by slaves. Most strikingly, they have a brass circlet, which was donated at the end of the 19th century, and at that point, the curators listed it as a dog collar. But if you look through the collection of paintings from the 17th century, there are no images of dogs wearing collars like this. But there are plenty of images of young black men wearing those collars. These young men were frequently given jobs as servants in wealthy households. They were referred to as moors. And it was kind of a side business of the massive European slave trade that was mostly sending black people from Africa over to the new world to work on plantations.

So in some sense, this exhibition is the Rijksmuseum coming to terms with its own connections. Blind spots about the slave trade.

Yeah. The Netherlands is engaged in a big national cultural reexamination of race relations and the Rijksmuseum needs to participate in that dialogue if it's going to stay relevant. So people may be familiar with the argument over a Dutch tradition called Svarte Piet, which is sort of a blackface tradition connected to the St Nicholas holiday in December. And what's remarkable when you go through this exhibition is the volume of paintings of young Black men in 17th century Livery serving as footmen and basically household slaves in the 17th century Netherlands. And that looks exactly like Svarte Piet. And part of the whole argument in the Netherlands over Zwarte Piet is do we really have to regard this as an embarrassing and worrisome legacy of our history of slavery? People try to deny that there's a connection between and slavery. And when you look at these images from the collection, that's absurd. This is exactly what Zwarta Piet represents.

And so in that sense, do you think this exhibition is contributing to those debates?

It's not that people in the Netherlands and in Europe in general are unaware of the history of slavery entirely, but they tend to think that too much emphasis is given to it or that it happened long ago and far away and they want to distance themselves from it. What this exhibition does is partly give you a really concrete sense of how central slavery was to the empire building effort that was at the foundational moment of the establishment of these nations. And I think it helps people get a sense of how close it is and of how connected it is to their current identities as Dutch people.

Thanks very much for joining us, Matt.

Thank you, J.

For decades, Marmite has been a staple in British cupboards. The salty tar like spread has also made its way into the British lexicon. To describe someone or something as Marmite is to say it's a love it or hate it proposition. But the idea of Marmite as a polarizing foodstuff didn't come about from dinner table debates. It came from an inspired moment of advertising history.

In the mid-19th century, German scientist called Justus von Liebig realized that if you add salt to spent brewer's yeast, it triggers a reaction called autolysis, which basically means that the yeast starts to digest itself.

Arthur House writes about culture for the Economist and has been looking into the history of this sticky substance.

The cell walls break down and what you're left with is an amino rich goo, kind of primordial goo, which when concentrated and Centrifuged becomes something like what we know today as Marmite. So it didn't catch on in Germany, but it did in England. And in 1902, the Marmite food Extract Company was formed in Burton on Trent, the capital of Britain's brewing industry.

And how did the company convince people to eat this primordial goo, as you call it?

About 10 years after the company was formed, the first vitamins were discovered and isolated. And as it turned out, Marmite was packed full of the B type. So suddenly it became a health food and was marketed as such and it was sent out to nourish the troops in the First World War and also to prisoner of war camps in the Second World War. So for the first few decades of Marmite's existence, marketing it was quite easy, really, because it was good for you and it helped Britain win wars.

And it's remained popular since then?

No, no, it hit some problems in the 1970s. It had previously been marketed at village hall health clinics, so studies had shown that you were much more likely to like Marmite as an adult if you'd liked it as a child. So Marmite put a lot of effort into marketing it at these mother and baby clinics up and down the country. But these fell to the wayside in 1973 when the NHS was reorganized and they were replaced with dedicated welfare centres where you weren't allowed to sell anything. So all of a sudden, Marmite's main point of sale was cut off. As well as that, there were concerns over eating salt and the rise of the breakfast cereal. And these things combined to mean that come the mid-90s, Marmite was a brand in decline.

So what did the brand then do?

So Marmite badly needed to appeal to a new generation, and it fell to an advertising agency called BMP DDB to save the brand. And a young creative duo called Andy MacLeod and Richard Flintsome were tasked with the brief. And when it landed on their desk, Andy MacLeod, he told me that he took one look at it and said, I ain't Marmite. And his partner said, oh, I love it. And they just looked at each other. And this was the genesis of Love it or hate it. So the campaign launched in 1996 with two ads that were to run at either end of the an ad break, one with the refrain, I hate Marmite, and the other refrain being, my mate Marmite. And it was considered pretty bold and brave to say that some people hate your product at the time.

I hate Marmite, I hate Mama.

And in their irony and humor and self awareness. They appealed to Gen X, a generation that had become jaded with traditional marketing techniques. And it struck a chord with those kind of young adults. And indeed, that was reflected in the sales, which grew 50% in that demographic over the next five years.

So it was a bold advertising choice that has really stood the test of time. Would you call that a moment of genius or just a stroke of luck, do you think?

Well, I think what was really clever about the campaign is that it created tribes love it or hate it. It didn't matter whether you loved the product or hated it or indeed were indifferent about it. You were included whether you liked it or not. And that created a national conversation which over time resulted in Marmite passing into idiom for something polarizing.

I feel almost obliged to ask, do you love it or do you hate it?

Do you know I like it. I'm not exactly on the fence, but I like it. Of course, it's not true that you either love it or hate it, but it is a polarizing food, and what they did was to focus on that and then exaggerate it to an absurd degree.

Arthur, thank you very much for your time.

Thank you.

That's all for this episode of the Intelligence. The show's editor this week was Kim Gittleson. Our sound engineer is Daniel Lloyd Evans, with help from Saul Rivers. Our senior producers are Hannah Mourinho, Duncan Barber and Sam Colbert. Our producer is Stevie Hertz and assistant producers Jason Hoskin and Abasoye Oshundairo, with extra production help this week from Dan Ashby, Kevin Kaners and Lucy Taylor. We'll all see you back here on. Sam.