After the Housing Bust: Foreclosure
by Jeff Davis
The great American housing boom of the early 2000s, when family home real estate soared to insanely inflated levels, began to tank about a year ago. This was an expected development. In finance as with gravity, what goes up must always come down. Now millions of American families are facing the results of that bust. They can’t pay their wildly inflated and outrageous mortgages, and so they’re losing their homes to foreclosure.
In addition to sky high real estate prices, very few Americans will be lucky enough to hold onto a good-paying job long enough to pay off a mortgage –safe from arbitrary lay offs or outsourcing. Very few people have the foresight to save up enough money to span several months -let alone two or three years- if an especially bad recession hits. Nothing more than luck or wealthy parents will save Americans from losing their homes after they miss the first three payments after losing a job.
Yahoo News reports that “A new Center for Responsible Lending (CRL) study reveals that 2.2 million American households will lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market.” Huh? Come again? $164 BILLION? That’s enough to run the whole Iraq and Afghanistan wars for…oh, for several months!
The Yahoo article continues: “CRL’s research suggests that risky lending practices have triggered the worst foreclosure crisis in the modern mortgage market, projecting that one out of five (19.4%) subprime loans issued during 2005-2006 will fail….The report discusses a number of factors that drive subprime foreclosures — in the majority of cases, borrowers receive high-risk loan features, packed into an adjustable rate mortgage with a low start rate, that is approved without considering whether the homeowner can afford to pay the loan after the rate rises. Adjustable rate mortgages known as 2/28s (or “exploding ARMs”) operate with an initial “teaser” rate for two years, followed by a steep payment increase. And, regardless of a borrower’s credit history, the almost one-quarter of American families who get subprime loans find them crammed with other high-risk terms such as prepayment penalties, limited income documentation, and no escrow for property taxes and hazard insurance.”
Egads, are people STILL falling for that old adjustable rate swindle? I don’t know if they still call this practice “ballooning,” but I am always amazed at the number of people who either don’t read the fine print or don’t understand what they’re signing when they fall for this old usurer’s trick. Adjustable rates are like the coils of one of those Burmese pythons now ensconced in the Florida swamps, and just as dangerous. They get their coils around some hapless family and squeeze and squeeze and squeeze. In many cases, less than twenty per cent of someone’s mortgage payment goes to pay off the loan itself. The rest is interest, pure profit for the Jews and capitalists who run the sleazy mortgage banking racket in this country.
Yahoo goes on to complain that poor blacks and Latinos are getting ripped off: “Trouble in the overall subprime market spells trouble for African American and Latino families across the country. Although white families receive more subprime loans overall, African Americans and Latinos receive a higher proportion of high-cost loans than any other group, a fact consistently verified annually by data lenders submit under the Home Mortgage Disclosure Act (HMDA)… [The report] estimates that 8 to 10 percent of all African American and Latino families who received a home loan in 2005 will be affected by subprime foreclosures.” Could this have anything to do with the fact that these minority families are being tricked into signing papers they don’t understand?
It’s estimated that there are presently something like 2.2 million American homes facing foreclosure, and despite Yahoo’s whining, most of those families losing their homes are going to be white and middle class. A government that actually cared about its citizens might do something about outsourcing and the many reasons for the rising cost of real estate. Perhaps it’s time to start supporting a third party before we all end up living under a bridge with everything we own in a shopping cart?