Yes, scrooged, that's what the middle class will get if they are not given some kind of help to keep their homes. We can all debate how this happened but homeowners are merely one part of the obscene equation that led us down this road.
Losing a home is not just a paper transaction between a bank and a borrower. It goes much deeper than that and can affect a whole community.
According to Freddie Mac, the average foreclosure cost is $60,000.
If you are one of the thousands of American’s facing foreclosure, you may have a great deal more bargaining power than you ever thought. Analysis from Freddie Mac and large banks show that their cost to foreclose on your home is in the range of 60,000 dollars on average.
The high cost of foreclosing on a loan is ample evidence that if you are having a hard time making your housing payment, talk with the lender. They have a strong incentive to work out the problems with the loan and try to find an accommodation.
Unfortunately, most borrowers do not contact their lending institution until the problem is too late. A forthright and honest approach will provide you a much better chance of saving your home and keeping the property out of foreclosure. Freddie Mac says that 68 percent of low income borrowers could be spared foreclosure if lenders created a new plan for them.
Source
It's expensive to foreclose on a house and it also brings down neighboring homes prices, which is expected, since we know that home prices are too high and they will continue to turn downward. Some have estimated that it will take at least a decade for home prices to recover.
But the cost to foreclose a home is just the financial cost. When a home is foreclosed upon, that is something that will wind up on a borrowers credit report for ten years. Short sales also affect ones credit score. And it seems people forget that when one is looking to rent they must provide a credit report. So what then for these people?
But there is the human toll as well, from loss of community to loss of one's hope. We're talking about the security of one's family and the heart of who they are. Homes aren't just property for many, but a dream come true to own their own destiny. I truly believe this is why so many people wanted to believe they could afford these homes and mortgage companies were happy to prey on their hope. They also pushed dangerous loans to those who could afford a conventional set up because it meant higher profit margins.
We can hem and haw all we want about the apparent lack of savvy by many of these home buyers but it still doesn't take away the responsibility of the system. That these loans were bundled and sold and resold and that the whole pile of paper went up in flames. Just as we can't let the Unions fail by the folding of the big 3, we cannot let home ownership fail as I truly believe it would be the demise of the middle class, just another nail in the coffin.
According to Habitat for Humanity, home ownership has many benefits, all of which are important to keeping the middle class afloat.
Educational Success
Children of homeowners enjoy higher rates of educational success, including graduation rates and post-
secondary education.
Children of homeowners have a 25 percent higher high school graduation rate (Homeownership
Alliance of Nonprofit Downpayment Providers),
Homeowners' children are twice as likely to acquire some post-secondary education (Harkness and
Newman 2003).
Children of homeowners are 116 percent more likely to graduate from college (Homeownership
Alliance of Nonprofit Downpayment Providers).
ANd more importantly to Democracy, Homeowners are more likely to be involved in local organizations and more politcally aware.
Civic Participation
• Homeowners have higher rates of participation in community organizations, such as clubs, neighborhood associations, and religious institutions, than renters. Homeowners also have higher rates of direct political participation and have a greater awareness of local political officials.
Homeowners vote at a substantially higher rate than renters, 69 percent versus 44 percent (Drier1994).
Homeowners are about 10 percent mote likely to know their U.S. Congress member by name(DiPasquale and Glaeser 1998).
Homeowners are 9 percent more likely to know the identity of their school board head (DiPasquale and Glaeser 3998).
Homeowners are 1 5 percent more likely to vote in local elections,
Homeowners are 6 percent more likely to work to solve local problems (DiPasquale and Glaeser 1998).
Homeowners are 12 percent more likely to garden (DiPasquale and Glaeser 1998).
Homeowners report that they attend church more regularly than renters (DiPasquale and Glaeser 1998).
Homeowners give significantly more money to their churches, about S150 more per year, than renters (Rossi and Weber 1996).
On average, homeowners are members of .25 more non-professional organizations than renters(DiPasquale and Glaeser 1998)
Now granted, who is to say that everyone who loses their home will stop caring about their communities or their children may do badly in school, but it certainly can't be helpful to them. It's not just homeowners, we're talking about their children and a whole generation that will be watching their opportunities slipping through their parents fingers. Once a home is lost, it is years to get back to the place where people were before. This is could be devastating on so many levels.
"This housing crisis is taking away the innocence of our kids," says Phillip Lovell, vice president of education policy for First Focus, a Washington, D.C.-based bipartisan advocacy group focused on families and children.
"Kids take their homes for granted, and when you lose that, there are long-term impacts. It cripples children. It affects their education, health and behaviors. These are low- and middle-income children. It runs the income gamut."
Researchers are beginning to study the impact of the current housing crisis on children, and their findings are bleak: An estimated 2 million children will be directly affected by the subprime mortgage crisis as their families lose their homes to foreclosures, according to an April report by First Focus.
That number is considered low, the group says, because the study didn't include families who were renters when they were evicted as a result of foreclosures on their buildings, or families who bought homes with prime mortgages.
USA Today
The resulting behavioral problems and educational issues that effect kids who have lost their homes could be a sweeping change that we don't actually want. As I've said, this is not just a "house", it's a home and these are not just "homeowners", these are parents and families.
The irony to all this, the housing bubble was also part of why so many people could not afford to buy homes! It was so out of reach for so many two income earners that some became desperate. The deflation of the housing market has to happen in order to save the middle class as well.
Cathy Mano, 44, works at a nonprofit in San Francisco. Her husband is an acupuncturist. The two pull in a little less than $100,000 a year together. Mano knows she's nowhere near the poverty level, but she's not sure home ownership is in the cards.
"We can't afford to buy a home," she says. "Housing costs are so high that we haven't really thought about it -- although I do more often now that I have a daughter."
They don't have a yard, which means her daughter can't have a dog, Mano says. "So she has a guinea pig."
Home ownership used to be taken for granted by the American middle class. No longer. Rising home prices have made ownership impossible for many middle-class families, while easy credit and the pressure to overreach during the recent housing run-up have left America with a nasty housing-bubble hangover.
MSN
So now what? The continued downturn in housing prices is a welcomed relief for all those people who have not bought homes due to being out of their reach but at what cost?
How can we find a balance? I do believe that homeowners should get help and that those who can show that they can pay their mortgage with reduced principals and interest rates should be given the chance to try. Sadly, loan modification is not working as well as people had hoped.
"After three months, nearly 36% of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53%, and after eight months, 58%," the Comptroller said....
As to why:
Foreclosure That question "has important ramifications for the foreclosure crisis and how policymakers should address loan modifications, as they surely will in the coming weeks and months," the Comptroller added.
LA Times
This was as of December 8th and just because loan modifications aren't working doesn't mean we have to try. I really could care less why people are having a hard time paying their mortgage, ultimately the most important thing is to keep people in their homes so they can eventually come back up for air and be part of building the economy again. I believe this with all my being that this is the right thing to do, regardless if you believe it to be so.
I do believe it is that dire and I do believe it's going to get worse before it gets better and I know I'm not the only one. There is an expected second wave of foreclosures on the horizon.
In 2007, Tilson teamed up with Amherst Securities, an investment firm that specializes in mortgages. Amherst had done some financial detective work, analyzing the millions of mortgages that were bundled into those mortgage-backed securities that Wall Street was peddling. It found that the sub-primes, loans to the least credit-worthy borrowers, were defaulting. But Amherst also ran the numbers on what were supposed to be higher quality mortgages.
"It was data we'd never seen before and that's what made us realize, 'Holy cow, things are gonna be much worse than anyone anticipates,'" Tilson says.
The trouble now is that the insanity didn't end with sub-primes. There were two other kinds of exotic mortgages that became popular, called "Alt-A" and "option ARM." The option ARMs, in particular, lured borrowers in with low initial interest rates - so-called teaser rates - sometimes as low as one percent. But after two, three or five years those rates "reset." They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500.
Source
Of course people took these rates because they were hurting and they wanted some breathing room and they thought, things are going to get better, yet they haven't. Things haven't gotten better and people are still losing their homes.
I believe that as Democrats it is our responsibility to guard and protect the middle class, even those who got greedy and wanted more than what they could afford. I believe they deserve a second chance. If large institutions can have a second chance even though they did what they did fully aware of the consequences, then why can't we help the little guys?
Isn't it time for us to put our judgment aside and do what we can to keep the entire Country afloat? The middle class is what has made America, AMERICA! And for whatever reason someone finds themselves close to losing their home, they deserve a second chance as well.
This goes to the very core of why we call ourselves liberals, that we believe in a safety net and we believe in holding each other up in times of need. This is what makes us progressives, that we cannot let our Country continue the slide backwards. Wages must go up, manufacturing has to come back to our shores and innovation must help us continue to grow in the right direction. This of course has to include Universal Health Care and affordable education but it won't matter much if our society crumbles.