Mortgage crisis continues
By Jerry Goldberg on May 22, 2014
A new report documents how millions of people across the U.S. continue to suffer the effects of the housing crisis that began around 2005.
Published in early May by the Haas Institute for a Fair and Inclusive Society at the University of California, Berkeley, the detailed study is entitled “Underwater America: How the so-called housing ‘recovery’ is bypassing many American communities.” (tinyurl.com/ka3xa7g)
From September 2008 through the end of 2013, says the report, approximately 4.9 million families lost their homes to foreclosure, and between 2010 and 2013 another 1.3 million lost their homes to short sales (where homeowners sell their homes below what is owed to avoid imminent foreclosure).
U.S. households, according to the Haas report, lost $7 trillion in household wealth between 2006 and 2011 as a result of the decline in their home values. In 2012, the U.S. homeownership rate fell for the eighth year in a row. Despite the current “rebound” in home prices, which is expected to slow down dramatically in the near future, the total value of owner-occupied housing continues to be $3.2 trillion below 2006 levels.
Because home ownership constitutes 92 percent and 67 percent respectively, of the net financial assets for African Americans and Latinos/as, compared to 58 percent for whites, overall wealth among African Americans and Latinos/as declined by 53 percent and 66 percent respectively, compared to 16 percent for whites during 2005 to 2009, according to the study. This reflected the disparities in foreclosure rates between people of color and whites in the U.S.: 11 percent for African Americans and 14 percent for Latinos/as between 2004 and 2008, compared to 6 percent for whites. This is because the banks targeted African Americans and Latinos/as with predatory, subprime, pay option and other adjustable rate, exotic mortgage loans.
The report emphasizes that despite press reports trumpeting the “housing recovery,” oppressed communities especially continue to suffer the ravages of the housing crisis, with millions of homes still underwater (meaning homeowners owe more on their mortgages than the market value of their homes). The report notes that underwater home loans are far more likely to end in foreclosure.
Some of the key findings of the Haas report are:
§ 1 in 10 U.S. residents lives in the 100 hardest-hit cities (with populations over 100,000) where the number of underwater homeowners ranges from 22 percent to 56 percent.
§ In 71 of these cities, African Americans and Latinos/as account for at least 40 percent of the population.
§ In 2013, more than 320,000 homeowners in these cities went into default or foreclosure.
§ More than 10 million people in the U.S. live in the 395 ZIP (postal) codes with populations over 5,000 where between 43 percent and 76 percent of homeowners are underwater.
§ In almost two-thirds of these ZIP codes, African Americans and Latinos/as account for at least half of the residents.
§ The 11 states with the highest number of hardest-hit ZIP codes are (in order): Georgia, Florida, Illinois, Michigan, Ohio, New Jersey, Maryland, Missouri, California, Nevada and North Carolina.
FHFA: ‘No principal reductions’
Government corporations Fannie Mae and Freddie Mac will still not consider principal reductions on mortgage loans, according to the new Obama-appointed director of the Federal Housing Finance Agency, Mel Watt, on May 13. Housing activists were profoundly disappointed by the announcement. FHFA oversees Fannie Mae and Freddie Mac, which now either own or guarantee about 75 percent of all mortgage loans.
According to organizers with Detroit Eviction Defense, there was one ray of hope from Watt. The FHFA announced a pilot program for Detroit where nonprofit agencies could buy foreclosed properties at market value pre-eviction and work out an arrangement to keep families in their homes. Organizers say this program is a concession won as a result of the pressure of DED with the support of the United Auto Workers.
While Detroit Eviction Defense views this small victory, which still must be implemented, as a potential step forward, the committee is vowing to continue its direct action home defenses, as well as pressing its demands for a moratorium on foreclosures and evictions for all Fannie Mae and Freddie Mac homes, principal reduction for underwater homes, and that repossessed homes be sold to owner-occupants (not investors, as is currently done) at market value. The UAW, several other unions and approximately 75 community organizations have endorsed this DED program in defense of homeowners’ right to remain in their homes.
Goldberg is an anti-foreclosure attorney and organizer in Detroit.