Since 2006 Americans have seen the number of foreclosures rise, and the economic damage has been overwhelming, but foreclosures are not just a financial problem. Recognizing the severity of the crisis, the government has put forth several initiatives, some providing aid to banks, their balance sheets deluged with billions in foreclosure inventory, and other plans attempted to help struggling homeowners remain in their homes. However, little has been to actually alleviate the problem, and foreclosures continue at a record pace.
Not only did the government’s efforts fail to provide relief, they served to anger many who felt wronged by such plans. “Kick the deadbeats out,” some have suggested. “I didn’t use my home as an ATM, and I pay my bills.” The anger, often directed at those facing foreclosure was for many, I believe, frustration with the government and big banks for their complicity in allowing the problem to reach a crisis level, and for their failures to properly address it. But the problem goes beyond who is at fault and ultimately reaches each of us.
Regardless of whom we feel to be culpable, and whether or not we empathize with the actual victims of foreclosure, the result of having millions of additional vacant homes could create social and economic problems of immense proportions, the effects of which may be felt for decades. Each foreclosure has a direct impact on local home values, and each abandoned home creates an environment for crime and blight. Municipalities, their budgets already strained by the recession, will struggle to provide adequate fire and police protection. Funding for local schools will suffer, local businesses will fail, and the character of some neighborhoods will be forever changed.
While many of the foreclosures may be purchased by investors, they’re frequently bought at bargain-basement prices and will either be offered as rental units or sold for quick profits. In either case, the character of the neighborhood may ultimately be altered.
Of course there are exceptions—some neighborhoods will see no adverse effects—but the number of locations that will be or have already been dramatically altered is sufficient to have a long-term social impact, the results of which may not surface for several years. We need to solve the foreclosure crisis; and as much as possible we need to keep neighborhoods intact. Foreclosures are more than a financial problem and failure to address that problem will cost much more in the end.
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John, as always great information.
According to the governments Making Home Affordable Program, 60.2% of the families indicated that "loss of income" is the cause of their hardship.
Not everyone bought more than they could afford or used their home as an ATM, so the "kick the deadbeats out" clan, just don't see the bigger picture.
Greg - There are lots of homeowners suffering from job loss, illness, and other legitimate reasons for not being able to make their mortgage payments, and their foreclosures will impact all of us.
It is nice to read an article that is not judgemental. There is plenty of blame to go around and what is more important is to get through this mess.
Marcy - And a mess it is. I do feel for those who have lost their homes.
John,
Thanks for your insight. At this stage of the game, name calling and finger pointing simply doesn't help those most in need of a solution.
Some people were victims of the market itself. If they bought at the top of the market, even with a substantial downpayment, they are likely underwater and will remain so for a long time. There are those who used their homes as an ATM machine. How they used the money may be an issue, but the home appraised for the amount of the loan requested at the time requested. Some may say lack of planning on their part is no cause of concern on my part. As you point out, however, it most definitely is. No easy solution, but we must keep searching.
Linda - And it would be nice to see our "leaders" working on viable solutions.
Wayne - We must insist that the search continue.
There's a lot of blame to go around. As Wayne says there's no easy solution. IMO most (myself included) have been in the denial phase thinking and hoping that the housing market is going to recover shortly. It's not. We have to deal with what is in front of us.
Pamela - And once we face that reality, we can begin the next phase.
Thank you for not finger pointing! :-) There really is no simple solution -- one solution could trigger 2 or 3 more issues.
Kerry - It would be nice if we could begin working on a viable solution.
Hi John- Thanks for recognizing the ripple effect of foreclosure. Many homes were over valued and when the fire storm hit the effect decline was fast and devastating. There comes a time when the home owner can no longer keep their footing the "slippery slope effect" takes over. As a homeowner resigned to foreclosure, we are no longer looking to correct or save the home. We need to get out of a mortgage written by an individual who should have known better, our home was valued at the amount that was needed to write the loan. I like to think of the whole event as "Quick and Dirty". It was a drive by mortgage that has ruined our credit, cost us our home, and just for fun we get to move into a rental until we become less risky(credit wise) or the mortgage industry gets its act together.
Shelly - The ripples have created a"wave," the effects of which will be seen for years. You're just one of millions who have seen the effects firsthand. Good luck!
John,
Investor buying activity in reducing housing inventory is great, but as you state the character of neighborhoods where they operate will change, usually for the worse. Existing homeowners are understandably unhappy and will likely seek other pastures, accelerating the decline.
Esko - Resolving the issue will take years and will bring some unwanted changes.