Is Your Home Still Your Castle As Foreclosures Rise

When Hurricane Katrina flooded New Orleans, the world saw a disaster unfold. Homes sank underwater, bodies floated away, and to this day no one has really accepted responsibility while thousands remain homeless. Katrina shamed our nation in a saga spawned by criminal neglect, inept government responses and indifference in high places.

No one with a home in America can ever be sure that a similar tragedy couldn’t befall them — whether through floods, tornadoes, fires or by the severe weather that seems to be worsening in part because of global warming. Now there’s a new threat, a wave of foreclosures. Millions are saying goodbye to the “Ownership Society,” the so-called American dream.

Disasters R’Us, or so it seems.

Right now, in our midst, on streets nearby our own, a national tragedy of an even larger proportion is unfolding with a predictably pathetic response from an “able to do nothing” Administration with still a tepid response from politicians, candidates, and even progressive organizations.

Over two and a half million American families are facing foreclosures in what is shaping up as a 50 State Katrina. Many of their homes also house tenants who risk eviction. When a home is foreclosed upon, the house next door loses value. Soon, there goes the neighborhood and the city tax base. The ripple effect is dramatic.

Even more dramatic are some of the tactics homeowners are using to fight back against many of the deceptive subprime and other loans that knowingly put them in unaffordable situations. When courts favor property rights over human rights, many are just trashing their homes in an orgy of anger and revenge before abandoning them.

You might say these homeowners should have known better. True, some may have been scammers in the American tradition of always seeking a good deal, buying now and paying later. But there’s no longer any denying that a large number were victimized by predatory practices and “deals” pedaled by sleazy brokers but backed by top banks and investment houses.

Richard Biter, a former Subprime salesman tells all in, “Greed, Fraud & Ignorance: A Subprime Insider’s Look at the Mortgage Collapse.” He reports, according to a review by blogger Charles Hugh Smith, “that up to 80% of all subprime loan applications were rejected by honest subprime mortgage brokers. This stunning statistic suggests the frenzy which overtook the nation as people who were clearly below-average credit risks stormed the housing market, trying to get in and get rich just like everybody else.”

Their mortgage paper, often inflated by fabricated appraisals, was then resold into Wall Street, securitized, sliced, diced, bundled and resold again as “asset backed” when they weren’t. This fraud has led to BILLIONS of dollars of losses and write-downs by institutions that should be prosecuted for perpetuating a white-collar crime wave.

Unfortunately, these crooks will probably get off, and can afford to take losses. Most Americans living from check to check in an economy heading south can’t. Many are deeply in debt having lived off of equity loans from homes that long ago became ATM Machines. Other are facing job losses, trying to cope with rising costs in an economic squeeze that is getting worse.

This week, the Treasury Department got together six major lenders who are now offering to postpone foreclosures by 30 days. THIRTY DAYS! What generosity. Thanks a lot. Even Wall Street analysts say it’s a joke. There is a worse crunch to come as more mortgages reset and prices fall.

“With home prices expected to eventually fall 20% to 30% nationally about 10 million households will have negative equity,” explains economist Nouriel Roubini. “Banks will have to eventually recognize that even a plan that freezes the reset of most mortgages will not be enough. To stop foreclosures they will have to accept a reduction of the face value of the mortgage to the lower current value of the home. While this may be costly to the banks the alternative of foreclosure and selling such homes in an illiquid market is worse for creditors. Thus, much more radical policy options should be considered to avoid the biggest foreclosure crisis in US history.”

A few groups are protesting and some of the worst offenders are making deals with advocates like NACA and ACORN to front for their mortgages. These non-profits can do a better job of offering mortgages than greedmeisters like Countrywide. To stop foreclosures, mortgages have to be restructured and made affordable.

Not surprisingly, some protests are erupting but local governments are trying to muzzle them, The Detroit Free Press reports:

“A federal judged ruled Monday that two members of a group that supports a moratorium on mortgage foreclosures can hand out leaflets during State Attorney General Mike Cox’s Avoid Foreclosure forum today. Members of the Michigan Emergency Committee Against War & Injustice complained that they were told to leave Cobo Hall on Dec. 13 during an Avoid Foreclosure forum that attracted more than 4,000 people. They were forbidden to hand out leaflets demanding that Gov. Jennifer Granholm declare a state of emergency and impose a moratorium to stop foreclosures and utility shutoffs.”

Michigan is in a state of urgency on this issue. It was reported this week that “The Detroit area, hit hard by the double-whammy of unemployment and a slumping housing market, had the highest foreclosure rate in the nation last year, with several cities in California ranked close behind.”

If you drive through the Motor City as I did recently, you will see areas that look like Berlin after the war, blocks and blocks of empty house and spreading urban decay. There have been reports of “ghost towns” throughout the Mid West. Many families face the choice: heat or eat. No wonder, homelessness leads to an upsurge in crime.

Why aren’t we all fighting for debt relief like people in Africa did? Why don’t we have a bigger campaign for a moratorium on foreclosures until the scams are investigated as the FBI is starting to do, late as usual. Why isn’t this a national issue? The American Home Owners Resource Center in California told me that unscrupulous lawyers are trying to shut down their website (Ahrc.com) exposing fraudulent practices by lenders and homeowner associations.

If not now, when? Our homes used to be our castles. For some in deep debt, they became prisons until they aren’t there any more.

– News Dissector Danny Schechter directed “IN DEBT WE TRUST (IndebtWeTrust.com) and wrote SQUEEZED, an e-book on the crisis. (ColdType.Net.) Comments to Dissector@mediachannel.org

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Great Article! For Thomas that replied earlier…if the landlord forecloses then there are no homes for rent! I do believe we will see crime at an all time high as people with lack of employment pending loses of devastating proportions become desperate. Desperation is always a catalyst for unwanted but non unwarrented behavior. God help us all!

Good God !!
If it is a disaster then it is one of stupidity , greed , and an inflated idea of what “I deserve” both parties are at fault.Nether the buyers or the lenders have any one to blame but them selves. the only people that were truly “scammed” where those invested in funds that are now collapsing on them selves, they were scammed by incompetent managers of those funds.
Most of the buyers said yes to more house than they could afford with using knowingly inflated incomes that they did not posses, and using inflated appraisals that they were aware of or should have been. your own article illuminates that solid lenders were having no part in this mess. Hey if you to a leg breaker for a loan you know the ultimate result.
Keep one thing in mind, if you bail out the idiots and dishonest you bail all of them out including the “dirty” on both sides.
And if you want to use Katrina put the blame where it belongs the mayor the governor and the welfare dips that sat there and did nothing to help them selves , except to loot the stores. The doers got out came back and are rebuilding those “homeless” dolts are still setting in soggy trailers for some one to make it right for them.
Get it right the gov’ment can make it right for the lazy the waste and misuse of the help given to date should make that very clear, except to those with their head up their ass.

We, residents of the great U.S.A. Cannot be intimidated by none, call it Bernakie,Polson or big money families. We can survive this and much more, we are strong let things fall were they may so we can start all over again. Once we get going maybe at that time we can find who to blame and bring them justice. but, right now we need to be together to be strong again. Let this lesson not be forgotten. We need to let the banks they will not take our houses away we will defend our homes as we have defended our coutnry from other aggressions. Our homes will be ours and we will pay for them once the instigators of this fiasco have come up with solutions.

Danny - everyone was in on this…the homeowners, the mortgage brokers, the banks etc. it was free and easy money. Loans for 125% of the house value in some cases. even prime borrowers with high incomes who assumed the market here in the Bay Area would go nowhere but up are caught in the downturn. they took out risky loans and planned to refi (see the latest article in the San Fran. Chronicle). Those of us who did the responsible thing - who didn’t use our homes like a bank, took out reasonable fixed rate loans, and have faithfully paid our mortgages are seeing our home values evaporate and our neighborhoods get trashed. There are two homes in foreclosure now on my block here in Marin County…the homeowners have trashed the property and it appears that they’re just going to walk away. I don’t know what the answer is to this situation. but there are a lot of villains. we need to go back to the traditional 20% down so homeowners actually face a financial consequence if they walk away. I’m sure tho - that a lot of new buyers did not understand the terms of their loan. who can understand this stuff? When we refi’d (at a low fixed rate) we finally took the docs to a lawyer to be sure there were no hidden terms we didn’t understand.

Rocco

Hate to break it to you but when a house is forclosed on it sells for what the market dictates (asuming it is left in somewhat decent conditions by the previous owner)- to ignore this would just perpetuate the overpriced housing market.

That-a-girl Sally, give it to him!
You are right,the folks in katrina had it slung at them, the foreclosure bunch stepped in it them selves.
Pay back is a mother! and it is not up to us to pay to dig them out!! on ether side.

real estate is going to fall 50%, has in some areas, now do the math on 50% lower values and how many foreclosures we will have……….and it has nothing to do with greedy broker, good clean “A” paper borrowers with 20-30% down are now upside down in areas, those with high credit scores…………supply and demand……….supply and demand……..why does everyone make this so difficult……….

A superb blog that goes into a very good explanation of what the consequences of subprime are, is:
http://www.oftwominds.com/blogfeb08/instability.html

I am curious as to what they are learning.
Things like responsabilaty, planning, read and understand before you sign on?
Lets face it this the time of ME TOO, and supper size it — NOW!
And you don’t have to young to be part of it!!