The Life and (Eventual) Death of Toxie, Planet Money’s Toxic Asset

BY dchinni  May 21, 2010 at 11:37 AM EDT

Foreclosures and interest rates are just numbers. Sometimes the best way to examine an economic meltdown is to jump into it with abandon, to witness the carnage up close. In a sense, that’s what NPR’s Planet Money reporting team did a few months back.

In March, the staff pooled $1,000 to buy a piece of a toxic asset — a collection of bad mortgages, issued during the housing boom but now going into default — and named it Toxie. They are watching how it breaks up and dies.

Patchwork Nation is a fan of Planet Money’s efforts, so with their help we decided to map where Toxie’s mortgages are based and how they match what we have seen in the larger housing market and economy in our 12 community types. And Toxie shows in a close-up way much of what Patchwork Nation has been documenting for the past year.

There is plenty of blame to go around in the housing crisis — from lenders to borrowers — but when you get down to it, some communities played a bigger role than others in the crash that nearly brought down the economy.

One Asset’s Far Reach

Toxie is only one asset, of course — just one bundle of bad mortgages in a sea of thousands — but her far reach (and we think of Toxie as a gal due to her name) can be measured in many ways.

First, even though she is only one bundle of bad debt, Toxie’s 2,400 bad loans (Countrywide mortgages originally issued in 2005) reach into some 280 counties. At Patchwork Nation, we are watching 24 counties across the country particularly closely, with bloggers or news organizations tracking what’s happening in each. Seven of those 24 counties have at least one of Toxie’s loans.

But a better way of understanding Toxie is to break down where her mortgages exist using our 12 county types. When you do that, her lineage becomes more clear. Toxie was born of some of the wealthiest counties in America.

More than half of the loans in Toxie — about 1,500 — came from just two county types – the wealthy Monied ‘Burbs (about 900 loans) and the more exurban Boom Towns (about 600 loans). Those communities have higher-than-average median household incomes and have been hit hardest by the foreclosure crisis.

Add in the big city Industrial Metropolis counties (some 350 more loans) and two-thirds of the asset comes from wealthier locales.

Meanwhile, other county types in Patchwork Nation hold hardly any of Toxie. The nation’s Service Worker Center counties, small town communities scattered across the country, have only 37 loans in Toxie. The socially conservative Evangelical Epicenter counties, based heavily in the south, have only three loans in Toxie. Both those county types have median household incomes that sit below the county average.

In other words, NPR’s toxic asset, born of bad Countrywide mortgages in 2005, is largely a creation of the upper middle class. How does that jibe with what we know about the housing crisis in general?

Just Another Toxic Asset in the Crowd

Well, it may be that the most exceptional thing about Toxie is how completely typical she is. Over the past year, the county types with the highest foreclosure rates — not just the highest number of foreclosures, but the highest rates — have consistently been the three community types that dominate Toxie, and usually by a fairly wide margin.

For much of the past year the foreclosure rates in those three county types — the Monied ‘Burbs, Boom Towns, and Industrial Metros — have been at two per 1,000 homes or higher, and often quite a bit higher. Most other communities were at one per 1,000 homes or lower. Rural, agricultural Tractor Country counties have never broken 0.5 per 1,000 homes. (Toxie has no loans in Tractor Country.)

None of this is to engage in finger-pointing, but as the news fills with more accounts of populist outrage in America, it serves to note that, where the housing crisis is concerned at least, the problems seem to have largely emanated from communities that have more wealth and power than others. And those are some of the same places where the outrage is loudest, as we have noted on this blog.

That doesn’t mean that everyone in those counties is to blame for the housing mess. There are plenty of people in those communities, the vast majority, who paid their mortgages on time and never got into trouble.

And it doesn’t mean their points are any less valid, of course. Bad lending practices and seeking risky loans aren’t good — no matter who’s at fault.

But it does mean that at least some of the blame lies close to home.