The Fall Out from Foreclosures Affects All
The fall out from foreclosures affects all and not just the direct players in the game – the lenders and borrows.
In Michigan after exiting from the ministry ten years ago, Greg Sterns became the financial manager of Lighthouse, Oakland County. It is a non-profit body based in Pontiac. His job was to help those who were buying houses for the first time and to give advice to people about managing their budget. He held regular classes, ran meetings and sat down with financial problems of individuals.
The last two years has seen a dramatic change in his work schedule. Stern said, “The primary thing we’re working on is the foreclosure crisis. We’re in the trenches and we’re getting buried.” The situation is particularly grim in Oakland, Macomb and Wayne counties of Michigan.
The hotline of Lighthouse is receiving about 40 calls each day. Each year the workload of Lighthouse has been increasing. In 2006 there were 200 of their clients facing foreclosure. In 2007 the number went up to 400 and it was 800 in 2008.
Looking at the figures there is no doubt that the economy has been hugely impacted upon. Income levels have fallen, as jobs have been lost. To further complicate matters have been health care problems. This situation has accelerated during the last three years. At the root has been the sub-prime crisis that has seen people with exotic mortgages stagger under interest increases. The majority of the Lighthouse clients are those who had got involved in these loans during the last three years. Sterns explained, “Probably 90% to 95% of the individuals we see are with sub-prime mortgages. We knew that was going to happen.”
If the economy of Michigan takes a turn for the worse again Lighthouse will see a further increase in number of clients. A bill if turned into law will however give some relief to the harangued borrowers. One clause would make it mandatory for lenders to allow 90 days grace to the borrowers. This time would allow for talks to be held between both the parties for an amicable settlement. If this did not happen then the judges would have the right to dictate terms. Other clauses would enforce moratoriums running into one to two years for certain types of mortgages, create a loan protection scheme for residential mortgages and also give protection to the tenants by giving them 30 days notice before being asked to leave.
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