The Foreclosure Blight Will Leave Behind Lingering Scars

Posted in Foreclosures, June 4th, 2008 |

The damage wrought by the foreclosure blight will leave behind lingering scars that will take many years to heal. In the forthcoming months thousands and thousands of Americans are at risk of surrendering their houses to foreclosures. Within two years of the bursting of the property bubble the deepest housing market slump is taking place – something that has not happened in decades.

The economic slow down has mainly been because of foreclosures. Along with it has come increased problem in the form of untended gardens, stagnant swimming pools, garbage miles, mosquito menace and crime. Entire streets have been turned into no-man’s land. Eric Rosengren, the president of Boston branch of the Federal Reserve Bank gave out a warning in a speech. He said ‘the large number of multi-family dwellings entering foreclosure presents a serious challenge to cities.’

California, Illinois, Michigan, Nevada, Ohio and Florida are the worst affected states. Marietta Rodriguez of the NeighborWorks America echoes the same sentiments. She says that it is apprehended that by this time in 2009 entire localities and communities will be severely affected by abandoned properties. Home ownership programmes were started under the aegis of NeighborWorks America in 1970 to encourage ownership of houses – the great American dream. With the escalation of the problem NeighborWorks initiated a special foreclosure prevention programme from 2007 to check the repossession of houses by the lenders. Hope Now backed by the Treasury runs along the same lines and was started off last year.

According to the rule of thumb, the housing market will eventually make a turn around. But recent surveys belie the hope. It is feared that quite some time will have to flow by before the economy gets back to its feet. According to RealtyTrac there were 243,353 foreclosures posting in April. It was a record with a 65% high jump from what it was in 2007 in the same month. In 2007 there had been 1.5 million foreclosures registering a spike of 53% from 2006, according to a report released by the Federal Reserve. Fed Governor Randall Kroszner had commented at a forum organized by NeighborWorks in Cincinnati that the Federal Reserve considers the running increased rates of mortgages leading to foreclosures as an ‘urgent problem’. Against this background he urged the banks to come forward with workout plans to help the foreclosure victims In extreme instances the banks should even write down chunks from the outstanding loans.