When Hurricane Katrina flooded
When Hurricane Katrina flooded
No one with a home in
Disasters R’Us, or so it seems.
Right now, in our midst, on streets nearby our own, a national tragedy of an even larger proportions is unfolding with a predictably pathetic response from an ‘able to do nothing’ Administration with still a tepid response from politicians, candidates, and even progressive organizations.
Two and a half or more million American families are facing foreclosures in what is shaping up as a 50 State Katrina. Many of their homes also house tenants who risk eviction. When a home is foreclosed upon, the house next door loses value. Soon, there goes the neighborhood and the city tax base. The ripple effect is dramatic.
Even more dramatic are some of the tactics homeowners are using to fight back against many of the deceptive subprime and other loans that knowingly put them in unaffordable situations. When courts favor property rights over human rights, many are just trashing their homes in an orgy of anger and revenge before abandoning them.
You might say these homeowners should have known better. True, some may have been scammers in the American tradition of always seeking a good deal, buying now and paying later. But there’s no longer any denying that a large number were victimized by predatory practices and “deals” pedaled by sleazy brokers but backed by top banks and investment houses.
Richard Biter a former Subprime salesman tells all in, “Greed, Fraud & Ignorance: A Subprime Insider’s Look at the Mortgage Collapse.” He reports, according to a review by blogger Charles Hugh Smith, “that up to 80% of all subprime loan applications were rejected by honest subprime mortgage brokers. This stunning statistic suggests the frenzy which overtook the nation as people who were clearly below-average credit risks stormed the housing market, trying to get in and get rich just like everybody else.”
Their mortgage paper, often inflated by fabricated appraisals, was then resold into Wall Street, securitized, sliced, diced, bundled and resold again as “asset backed” when they weren’t. This fraud has led to BILLIONS of dollars of losses and write-downs by institutions that should be prosecuted for perpetuating a white-collar crime wave.
Unfortunately, these crooks will probably get off, and can afford to take losses. Most Americans living from check to check in an economy heading south can’t. Many are deeply in debt having lived off of equity loans from homes that long ago became ATM Machines. Other are facing job losses, trying to cope with rising costs in an economic squeeze that is getting worse.
This week, the Treasury Department got together six major lenders who are now offering to postpone foreclosures by 30 days. THIRTY DAYS! What generosity. Thanks a lot. Even Wall Street analysts say it’s a joke. There is a worst crunch to come as more mortgages reset and prices fall.
“With home prices expected to eventually fall 20% to 30% nationally about 10 million households will have negative equity,” explains economist Nouriel Roubini. “Banks will have to eventually recognize that even a plan that freezes the reset of most mortgages will not be enough. To stop foreclosures they will have to accept a reduction of the face value of the mortgage to the lower current value of the home.
While this may be costly to the banks the alternative of foreclosure and selling such homes in a illiquid market is worse for creditors. Thus, much more radical policy options should be considered to avoid the biggest foreclosure crisis in
A few groups are protesting and some of the worst offenders are making deals with advocates like NACA and ACORN to front for their mortgages. These non-profits can do a better job of offering mortgages than greedmeisters like Countrywide. To stop foreclosures, mortgages have to be restructured and made affordable.
Not surprisingly, some protests are erupting but local governments are trying to muzzle them, The Detroit Free Press reports:
“–A federal judged ruled Monday that two members of a group that supports a moratorium on mortgage foreclosures can hand out leaflets during State Attorney General Mike Cox’s Avoid Foreclosure forum today. Members of the Michigan Emergency Committee Against War & Injustice complained that they were told to leave Cobo Hall on Dec. 13 during an Avoid Foreclosure forum that attracted more than 4,000 people. They were forbidden to hand out leaflets demanding that Gov. Jennifer Granholm declare a state of emergency and impose a moratorium to stop foreclosures and utility shutoffs.”
If you drive through the
Why aren’t we all fighting for debt relief like people in
If not now, when? Our homes used to be our castles. For some in deep debt, they became prisons until they aren’t there any more.
News Dissector Danny Schechter directed “IN DEBT WE TRUST (IndebtWeTrust.com) and wrote SQUEEZED, an e-book on the crisis. (ColdType.Net.) Comments to [email protected]