Mass layoffs cause foreclosures to soar
By Kris Hamel
The home foreclosure crisis in the United States continues to grow in scope and size. Workers are losing their homes at record rates as mass layoffs and plant closings affect millions.
A new twist has been added to the foreclosure disaster, one that accelerates the overall capitalist economic crisis even further.
What started out as a racist, sexist ploy by bankers and lenders to lure poor and working people into usurious subprime loans has now grown into an avalanche of foreclosures on homeowners with prime mortgage loans, mostly workers who have lost their jobs.
On May 25 the New York Times sounded the alarm with the headline: “Job Losses Push Safer Mortgages to Foreclosure.” Analysts predict that up to 60 percent of mortgage defaults in 2009 will be primarily due to unemployment, up from 29 percent in 2008.
The article reports: “From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.
“During the same period, subprime mortgages in those three categories increased by fewer than 14,000, reaching 1.65 million. The number of similarly troubled Alt-A loans—those given to people with slightly tainted credit—rose 159,000, to 836,000.
“Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.”
The article also states: “With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. That could exacerbate bank losses, adding pressure to the financial system and the broader economy. ‘We’re about to have a big problem,’ said Morris A. Davis, a real estate expert at the University of Wisconsin. ‘Foreclosures were bad last year? It’s going to get worse.’”
The Mortgage Bankers Association reported on May 28 that a record 12.07 percent of homeowners in the U.S. are currently in foreclosure or delinquent in their mortgage payments. “The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 3.85 percent, an increase of 55 basis points from the fourth quarter of 2008 and up 138 basis points from one year ago. Both the foreclosure inventory percentage and the quarter to quarter increase are record highs.” (mortgagebankers.org)
The Obama administration has earmarked $75 billion for “incentives” for banks and lenders to modify home loans, as they are required to do under federal law. The Making Home Affordable Program instituted in March was supposed to save up to 4 million homeowners from foreclosure. But the Treasury Department has estimated that the number of loan modifications accomplished thus far is “more than 10,000 but fewer than 55,000.”
Under the federal MHAP, unemployed workers must verify that they will be receiving unemployment benefits for at least nine months in order to count those funds as income for purposes of getting their mortgage modified. Many unemployed workers are or will be excluded from being able to take advantage of the program because of this. The program must be amended immediately to take into account the vast unemployment impacting homeowners.
It is the duty of the federal government to enforce all laws requiring banks and financial institutions to modify home loans under the terms of their multibillion-dollar, taxpayer-funded bailouts. It is past time for a blanket moratorium on all foreclosures and evictions to be implemented nationwide to mitigate the disaster facing poor and working people.