The government worked out a $9.2 billion deal with the banks, with $3.3 billion meant to go to some four million eligible homeowners who had been foreclosed on in 2009 and 2010. Although the original plan was to have an independent review of how much each homeowner was owed, ultimately the decision was made to let the banks themselves decide. As an inevitable consequence of this ludicrous approach, many of those seeking foreclosure relief say they were unfairly compensated. For instance, Eric Krasner of Frederick, Maryland, was foreclosed on in 2010:
Krasner figured he was owed $62,000 from the settlement, but when his check came, he received only $2,000. Many in his situation received as little as $300 in compensation. "Until Eric Holder does his job and puts bankers in jail, this is going to continue," Krasner said.
A new report from Home Defenders League, Alliance for a Just Society and New Bottom Line Wasted Wealth: How the Wall Street Crash Continues to Stall Economic Recovery and Deepen Racial Inequity in America,
points out the continuing impact on individuals and the economy from the foreclosure crisis. Some highlights:
The foreclosure crisis continued to destroy wealth on a large scale in 2012: Three years after the reported end of the Great Recession, the foreclosure crisis continued to destroy wealth on a large scale in 2012, with $192.6 billion in wealth lost due to foreclosures across the U.S., an average of $1,679 in lost wealth per household for each of the country’s 114.7 million households.
The most devastating impacts of the ongoing foreclosure crisis were in majority communities of color and racially diverse communities: ZIP codes with majority people of color populations saw 16 foreclosures per thousand households with an average of $2,200 in lost wealth per household. In sharp contrast, segregated White communities experienced only 10 foreclosures per thousand households and an average wealth loss of $1,300 per household.
More than 13 million homes are still underwater and at risk of foreclosure and more lost wealth: For reporting ZIP codes, there are at least 13.2 million underwater mortgages (when a homeowner owes more than the home is worth) on the books. The Congressional Budget Office estimates that 13% of underwater homeowners are already “seriously delinquent” on mortgage payments — they are foreclosures-in-waiting. If action is not taken to prevent these mortgages from going into foreclosure, Americans stand to lose nearly $221 billion in additional wealth from these mortgages alone.
A strategy of principal reduction would save money for homeowners, boost the economy, and create jobs: Principal reduction—writing down underwater mortgages to current market values—would create significant savings for underwater homeowners. It would also generate new economic activity and create jobs in local economies. Using 2012 data, a principal reduction program could produce average annual savings of $7,710 per underwater homeowner nationwide, boost the U.S. economy to the tune of $101.7 billion, and create 1.5 million jobs.
Unemployment and underemployment contribute to the widening racial wealth divide. Median wealth ratios measure White wealth for every dollar of wealth for people of color. In 1995, the ratio of White to Black wealth was 7-to-1. In 2004, it was 11-to-1. By the reported end of the Great Recession 2009, it had ballooned to 19-to-1. For Latinos, the White-to-Hispanic wealth ratio was 7-to-1 in 2004. Five years later, it was 15-to-1. Wealth was lost across the board from the Great Recession, but significantly more so for people of color. From 2005 to 2009, White median net worth fell 16% to113,149. But net worth fell by 66% for Latinos to 18,359, and 53% for Blacks to 12,124.
The protesters' chief goals sound like an echo: prosecute Wall Street bankers; end the foreclosure crisis by resetting mortgages to their current value (“principal reduction”); restore and rebuild wealth stolen from communities of color that have been the hardest hit.
Meanwhile, they get tazed and arrested while the bailed-out bankers have returned to collecting their gargantuan bonuses with no fear that anybody in authority is going to give them any grief.
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