Posts Tagged ‘Foreclosure Crisis’

The housing crisis has led to the humbling of the American economy. It is time to look at the foreclosure crisis from the Christian point of view. Invariably parallels are being drawn with the Great Depression but the foreclosure crisis of today holds little similarity with it.

Capitalism is not at stake and the foundations of the American economy continue to remain strong even during the current raging foreclosure crisis. In 1933 when Roosevelt took over charge there was a real crisis and the economy had collapsed. Most of the banks had shut down the entire nation was without business.

Although nothing similar to it is happening now, it is undeniable that the foreclosure crisis has shown that the financial infrastructure requires to be more realistic. For this reforms are required. To do so the ingredients are inflow of new ideas, a committed working class, strong demand by consumers, huge quantities of natural resources and unbridled intellectual power.

The foreclosure crisis is mainly about the excessive valuation of property. Inflated assessment led to risky financial steps. As the market began to correct itself the sub-prime melted down to the foreclosure crisis and evictions. Across the globe the markets had accepted the increased valuation as real. Based on this, brisk risky trading was indulged in on the assumption that this game could never come to an end. It was a fool’s paradise.

Other causes were also at play. The dollar began to slide as oil prices increased against the background of an economy that began to be more knowledge based in these days of technology.

Greed also played a part. Adam Smith had given one of the best explanations about the economy in his The Wealth of Nations. He said that the economy is about exchange of goods and services from one person to another. Each side must believe that something will be gained by doing so. Since the whole thing cannot be worked out through individuals, an economic network is necessary. The trading is done through currency exchange based upon a certain value that has been agreed upon. Wanting to gain something out of a deal is not really greed. It is the fundamental motivation for an economy to run. The Bible is quite clear on this point that the worker must be worthy of being hired and that he should be rewarded for his labour. Thrift and investment are other Biblical virtues. If the anticipated gains are unrealistic then it is greed. This is one of the major causes for the foreclosure crisis.

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Ben Bernanke, Federal Reserve chairperson warmed that the foreclosure crisis would worsen into a recession if the Congress delayed passage of the rescue plan. Unemployment would shoot up and so too would foreclosure of properties. Above all any procrastination would risk recession. The issue at stake was the $700 billion bail out plan chalked out by the Bernanke and Paulson.

But despite the blunt warnings the senators remained stubborn. Leaders from both parties wanted substantial changes in the proposal that has the backing of the White House. The conservatives among the Republicans shied at the very idea of governmental interference in the private capital zone. Nevertheless it seems that ultimately the bill will see daylight. Democrat Senator Dodd was for quick action.

The wrangling has not soothed the nerves of Wall Street. The Dow Jones fell by 161 points as indicative of the feelings. Initially the stock market had been euphoric but the dithering by the Congress is causing jitters. Oil prices too fell after the wild rally of the previous week. It fell to less than $107 per barrel.

To make matters worse the FBI has stepped in. It will be investigating irregularities in the activities of the financial houses that collapsed and were the immediate cause for this massive bailout plan. According to officials the FBI is focusing on possible fraud in happenings of the mortgage giants Freddie Mac and Fannie Mae as also Lehman Brothers and AIG. The individuals under suspicion will be scanned as also the financial bodies. The law enforcement officials chose to remain anonymous about these announcements because the investigations have already started and are in the preliminary stages. This brings 26 numbers of corporate lenders under the cloud since the last one year.

The spokespersons of Fannie Mae and Freddie Mac as well as Lehman Brothers were not available for immediate comment. Their woes are tied up with the sub-prime mortgages and ensuing foreclosure crisis.

Bernanke said, “The financial markets are in quite fragile condition and I think absent a plan they will get worse.” He gave stern warnings that with the non-functioning of credit markets, unemployment will become rampant and more houses will come under the foreclosure hammer. He said, “GDP will contract” and that it will become impossible for the economy to recover “in a normal, healthy way.”

What started as a cruel game of foreclosure between mighty lenders and humble borrowers has reached out to threaten Walls Street.

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It started with Bear Stearns and then went on to gobble up Freddie Fannie and now Lehman, AIG and Merrill Lynch. These big bodies have all grabbed the headlines while the ordinary American in a nail biting tension watches Uncle Sam assuring the ordinary man about the foreclosure crisis. It hardly took a minute for Bush to get over with the task and go on to more important matters like the bailing out of buddies.

When Fear is stalking each home all that the nation gets is a minute of empty promises and assurances. There is no doubt that the American economy is in shambles – no matter what the pundits say. Foreclosures are having the last laugh dominating and haunting the scene.

What can Tom and Mary down the street do? If they are looking for jobs then the shoes had better be tough because the queue is going to be hopelessly long. Others in the family facing inevitable foreclosure should hunt around for a mobile van to move into. There is a good demand for these in the market. The cautious who gets taken in by all the talk going around about foreclosure solutions might hunt out a counselor and waste some precious time.

Uncle Sam is ready with a helping hand to investment big bodies in Wall Street that have been ruined by their own greed and criminal irresponsible behaviour. For the ordinary Tom and Mary it is a one-minute breezy froth from a government that ignores the hard workingman and woman in the streets. The old are looking feeblyat a bleak future when time is no longer their ally.

This foreclosure crisis is the direct consequence of the laissez-faire policy of the Republicans. Millions of families are drowning. Numbers cannot gauge their pain. The GOP antenna is not even trying to pick up their potent messages.

The passing of the Housing and Economic Recovery Act was a modest step in the right direction in July, by the Congress. It encourages lenders to come forward of their own accord to refinance troubled mortgages with the participation of FHA. But critics are loud about how much it will really help because the issue is pivotal on the voluntary participation of the lenders. Lenders may or may not negotiate. As such it stands to reason that they will deal with only those houses that have some equity left over.

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In the lonely neighbourhood two large turtles were rescued from an abandoned foreclosed house in Discovery Bay. The turtles were lucky to be adopted by some school children. But one pit bull puppy was unlucky – it died tied to a fence in a backyard of Pittsburg. If people cannot survive the foreclosure attack what of the fate of the animals who are their pets?

Cecily Tippery specializes in foreclosed units is now busy rescuing abandoned pets from deserted houses. Right now they have their hands full taking care of a generous number of pets – all hit by the foreclosure wave. In a house in Antioch the group found a dachshund, beagle and Chihuahua huddled together with a dead turtle. In an Oakley house the only occupant was a Calico cat. Another house was crawling with a litter of kittens.

Abandoned pets are another grim aspect of the foreclosure crisis. More stories pet and foreclosure related stories are coming up from across the country.

In Ohio the animal welfare groups are in a huddle trying to find space for an increasing number of abandoned pets. In Arizona concerned pet lovers have set up an e-mail network to find homes for the foreclosed-pets. Stockton is at the centre of the foreclosure and Michael Parker an officer in animal services is a worried man. Thousands of evicted families have temporarily forgotten their pets.

So far there has been no detailing of the abandoned pets – unfortunate victims of the foreclosure fiasco. Stray news are pouring in but the problem is beginning to get attention says Paul Bruce of Humane Society of US. The problem can be understood. New landlords taking in tenants are often averse to pets. Many of the pets left behind by the foreclosure wave are too old or sick. They do not have veterinary records. Tippery falls within a ‘no-kill’ zone that makes the problem difficult to solve.

Contra Costa and Antioch do not have no-kill pet shelters. Agents are not happy about sending them there. The local rescue bodies do not have the funds to finance vet care for the abandoned pets. But work is underway by animal lovers. Individuals have paid for health checks of these foreclosure victims and they are hunting for adopters in an organized manner. It is heart wrenching to see not just toys left behind but living animals in houses that were once homes.

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In a statement the former mayor of Cleveland George Voinovich expressed his grave anguished concern for the ongoing foreclosure crisis in US. He is a senator from Ohio (R-Cleveland) and a former Governor.

He is especially concerned about the repercussions of the foreclosure crisis. Cleveland is his hometown and it is one of the worst affected zones. In his own locality three houses have been abandoned in front of his eyes – the owners have walked away leaving the properties to the mercy of vandals.

He had pitched in with others to revitalize the region with new sidewalks and saw to the repairs and maintenance works. For house construction he initiated a special tax abatement incentive. Now foreclosure clouds darken these same regions. One such locality is Slavic Village. It has the dubious distinction of ranking first in the foreclosure race. So on a very personal level he understands and realizes the sting of the foreclosure tornado that is sweeping through Ohio.
According to latest reports released by Mortgage Banker’s Association the foreclosure crisis is at its worst with Ohio being one of the hardest hit by it. It stands first with 3.72% of the loans slipping into foreclosures. The new law will allow three-year exception to the matter of debt forgiveness on house loans. There is also a clause that allows house owners to deduct mortgage insurance payments from taxable income.

An overwhelming majority by the House passed the second law, Expanding American Homeownership Act. By it Federal Housing Administration loan limits have been increased so that those facing foreclosures or resetting of interest rates will be easily able to refinance and move into safer harbours. The minor differences between the House and Senate bills will be ironed out and sent for the President’s signature in December.

The bill will give a fillip to the real estate market by bringing down the down payment condition from 3% to 1.5%. Consequently millions of Americans for the first time will get an opportunity to have a house of their own. This law also envisages a new counseling programme that will benefit those in the low and middle-income bracket.

Both pieces of legislation will be tools in the hand of the individual to preserve the sanctity and security of the home and the neighbourhood. There are still things to be done but a beginning has been made.

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According to the Colorado Division of Housing 7,117 Colorado foreclosure homes were sold at foreclosure auctions since January 2007. During the first quarter the total was 5,586 and during the second quarter it rose to 6,322. Each state has different foreclosure laws. In Colorado a unit can be sold at auction to a third party or the lender after 45/60 days from the date of filing the foreclosure notice.

During the first three quarters of this year 19,025 houses in Colorado have been sold at foreclosure auctions. In 2006, during these three quarters 15,112 units had been sold. 2007 has seen the highest number of sales since the Department of Housing has been keeping track of numbers from 2003.

Foreclosure is a legal process involving many steps. There is the possibility that all the numbers filed do not end up in auction sales. In the first, second and third quarters of 2007 the number of foreclosure filings were 9,443, 10,017 and 9,500 respectively. During the first three quarters of this year 28,960 filings had been listed. In 2006 the total number during this same time period was 28,435.

The information has been collected from County Trustee offices of Colorado. Foreclosure numbers decreased in the third from the second quarter in Adams, and Denver counties by 22% and 17% respectively. The trend was slowing down also in Pueblo and El Paso Counties. But in Weld, Jefferson and Boulder County it rose by 15%, 8% and 28% respectively.

The foreclosure crisis was triggered off by the housing boom, which had been fueled by a frenetic buying of houses by taking easy loans from the sub-prime mortgages. Some were genuine borrowers who did not understand the implications of low rates but were interested in improving their socio-economic status by owning houses. Many were speculators and investors who were sanguine that house prices could never tumble down. But when more and more borrowers found it impossible to cope with increased rise in interest houses began to foreclose. When the numbers reached jumbo figures the lenders realized that they had chewed more than they could digest. It became a giant crisis affecting both society and economy. Politicians became alarmed and all heads got together to sacrifice some scapegoats and work out a viable solution – at least for the time being. Perhaps the slowing down is partially due to this move but the overall trend is not good.

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Howling scavengers – the jackals and vultures, inevitably follow the predators. Rescue scammers who pose as helpers have closely followed the foreclosure crisis. The traumatized victims cry on their shoulders only to discover later that whatever was left in their pockets have been neatly picked.

A federal indictment report exposed that six people were accused of falsely acquiring title to dozens of houses. Questionable bank loans had been taken against these houses – the total amounting to more than $20 million. It was all part of a rescue game plan. The scam continued from November 2003 up to April 2005 focusing on house owners in Brooklyn and Bronx – the two boroughs of New York City.

Impending foreclosures had traumatized the owners and the cheats assured them that by deeding them the house trouble would be avoided. The argument was that the good credit of the helpers would enable the latter to get suitable bank loans that would finally stave off foreclosures. Third party ‘straw buyers’ would enjoy the title for about a year, pay off the original dues and make payments on the new mortgage. In reality the offenders paid off the original loans and pocketed the extra cash.

Lax lending practices and rising interests between 2005 and 2006, falling real estate market and shaky borrowers all contributed to the foreclosure meltdown. Thousands with weak credit history availed of sub-prime loans which were not otherwise available to them in the prime category. This led to defaults, delinquency and foreclosure. The chapter usually ended with auction and take over of the house by the banks or lenders.
During the third quarter this year there were 447,000 foreclosures in the country – the figures being inclusive of all categories of mortgages. Last year the figure was half this number – 223,000 amounting to a 34% rise.

The accused were also charged for submitting irregular false documents to various banks to inflate the value of houses so as to obtain sizeable loans for these straw buyers.
Some of the defendants – Maurice McDowall, Andrea Moore, Kerri Clarke, Marina Dubin and Michael Irving were part of rescue companies named Lost and Found Recovery LLC and Homes U us USA LLC. Another defendant, Alexander Lipkin was a mortgage broker for AGA Capital, New York. More than $1.4 million had been netted in through unscrupulous loans.
The defending attorneys remained tight lipped and unavailable for comment.

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The local and state governments will be gathering down for the budget session for the fiscal years 2008-09. But they are in a tizzy and huddling together over the newsbreak that foreclosures will soon seep into the smaller communities. This will worsen the situation with another 1.4 million houses being caught in the foreclosure net. Real estate prices are expected to fall further.

The worst affected are Florida and California – the two states that lapped in the luxury of escalating housing prices during the boom. The Associated Press reports that the Global Insight, an economic consulting firm, had compiled a study for the US Conference of Mayors that held a meeting in Detroit last week. The focus was on the foreclosure crisis and its related problems of crime and misery in the locality. The foreclosure net is spreading to include the general economy, according to some of the mayors. It is telling on the social fabric by breaking the backbone of society – the families.

Global Insight apprehends that property values will dip by $1.2 trillion in the coming year. California will account for half the figure. Here prices will go down by 16% whereas in the rest the drop will be by 7%.

The problem is from the drinking of a witch’s brew consisting of lending to high-risk borrowers in the sub-prime mortgage category. Now the poison is beginning to work and spreading like toxic fumes over all who made and took the drink and hapless bystanders also. With interests doubling, the borrowers just cannot manage. The inevitable result is foreclosure.

Politicians and lenders are in a scramble to help borrowers – in an attempt to save their own skins. ACORN – Association of Community Organizations for Reform Now is a consumer advocacy group operating across the county. It has recommended three suggestions to the mayors. Firstly to make the lenders agree to a 30 year fixed rate loan by modifying the existing loan so as to make the loan affordable to the borrowers. Secondly to finance counseling so that vulnerable families can be assisted and thirdly to call a moratorium on ongoing foreclosures.

Given the present scenario it is to everybody’s interest to halt the dreaded forward march of foreclosures. That includes the federal government, as overzealous lenders have been primarily responsible for this catastrophe. However the communities should be cautious about any tax-payer-subsidized plans.

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