There is a huge nationwide problem that I haven't heard any of the candidates mention that is only beginning to escalate. That is the increasing rate of foreclosures with families forced to leave their homes, taking with them huge losses and ruined credit.
I don't mean just local depressed economies which have suffered major layoffs, where people are unable to meet their obligations because they are unemployed. I'm taking about vibrant cities with lowering unemployment rates and a postive economic outlook.
In my analysis I go over what happened during the past 5-6 years in the U.S. housing market:
The housing market...accelerated in value [until] the tipping point occurred and housing prices began their descent. The boom was fueled by an atmosphere of low inflation and cheap, easy credit.
It used to be that you'd go to a bank to obtain a mortgage. The bank would assess your creditworthiness to make sure you could repay them.
If your credit was good, you'd qualify for a lower interest rate. If it wasn't so good, you'd qualify for a higher interest rate. And if you were deemed a bad risk, you didn't get a mortgage, period, until you could build up your creditworthiness.
Then the lending structure changed. Wall Street smelled the opportunity to make a lot of money from so-called subprime loans--mortgages to people with bad credit.
There were plenty of incentives to sell these loans: brokers and lenders could charge the prospective homeowners exorbitant fees and Wall Street investment firms could turn around and repackage the mortgages into bonds with high interest rates to attract investors. The credit of the people who were given subprime loans was pretty bad; so bad the mortgages came to be known as "liar loans" on the Street because borrowers often lied about their income and employment status to get them. Borrowers were also high-pressured and lied to by mortgage brokers. But housing prices kept escalating, so the value of the borrowers' homes kept increasing. If a borrower couldn't meet his obligations, he would just borrow some more money based on the higher equity he could extract from his house.
Everything was a-okay until housing prices stabilized and buyers began withdrawing from the housing market because they couldn't automatically "flip" the house (resell it for more money). Sellers began outnumbering the buyers and prices went down. So did the equity in these sub-prime-financed homes. Borrowers in over their heads couldn't refinance and became delinquent in their mortgage payments. Foreclosures multipled.
Soon whole neighborhoods were dotted with empty, boarded-up houses which had the effect of driving down the value of the house of the borrower next door. So even those with good credit became affected. The inventory of unsold existing homes increased, and is still increasing.
Most sub-prime and even prime mortgages are ARMs (adjustable rate mortgages). An ARM is a mortgage with an interest rate that changes. They usually start with better rates than fixed-rate mortgages. So far the sub-prime borrowers have been paying the lower rates; the mortgages will readjust soon and monthly mortgage rates will increase, leading to more foreclosures, with no light at the end of the tunnel.
I haven't noticed this on anyone's radar. It's a crying shame.
Crossposed on epluribusmedia.org