Investors, Lenders and Politicians all had a Hand in Creating the Foreclosure Crisis
At the core of the Great Recession is the foreclosure crisis. The usual line of thinking is to blame the banks for giving the nod to risky loans and for the borrowers who overreached themselves and started living in houses they could ill afford from the very beginning. An article in Vanity Fair refers to such homeowners are “infantile”. Financial experts have criticized them for living in ritzy houses with swimming pools and three-car garages. Even a Treasury secretary does not hesitate to have a swipe at such home owners for contracting mortgages well beyond their means.
A survey conducted by St. Petersburg Times notes that in Hillsborough County there are thousands of foreclosures. Here individual borrowers are being too much blamed for this mayhem. The reality is that those speculating in real estate and revenue-strapped local government are as much responsible for this crisis – the crumbling of the real estate market.
Investors together with flippers are responsible for nearly half the foreclosures in Hillsborough that have been posted during 2007 to 2009. Their dealing led to the massive inflation of prices of residential houses and this laid the foundation for the crash that was to follow. They were helped in every possible way at each step by the local officials.
The commissioners of Hillsborough permitted jumbo housing plans in the rural regions while overlooking impact fees from the developers. Leaders in Tampa gave the green signal to development of country clubs in distant New Tampa, closing their eyes to the obvious dangers of over construction.
In the over built real estate markets of Arizona, California and Nevada the investors purchased houses for the sole purpose of speculating – never lived in it even for a single night. But when the prices swooped down they could no longer afford to cling on to these.
Benjamin and Elizabeth Padilla purchased a four bed roomed dream in rural Hillsborough paying $200,000 for it. They are continuing to live and are current on their mortgage dues. But they are surrounded by empty units – mostly purchased by the speculating investors. The worth of their own house has rocketed down to $119,000. To make matters worse crime in the locality has increased. In her late fifties Elizabeth said, “We can’t do anything to get out of here. If we sell, we have to come up with the difference between what we bought and what it’s worth now, and we can’t afford that. We’re stuck.”
Related Posts
