Sunday, August 19, 2007

The boom goes bust

Owning a home provides a source of security and stability for many of our citizens. My Administration is committed to fostering an ownership society and helping more Americans realize the great promise of our country. Today, nearly 70 percent of Americans own their homes, and the rate of minority homeownership has climbed to above 50 percent since I took office in 2001. The Department of Housing and Urban Development is continuing to enforce the Fair Housing Act to confront housing discrimination and advance equal housing opportunities for everyone. We are also working with the Congress to modernize the Federal Housing Administration in order to better provide safe, fair, and affordable mortgages to first-time homeowners, minorities, and individuals with less than perfect credit. In addition, the American Dream Downpayment Act of 2003 is helping thousands of low to moderate income and minority families with the downpayment and closing costs on their homes. My Administration also continues to support more funding for the Self-Help Homeownership Opportunity Program and the HOME Investment Partnership Program, which provide low-income citizens and minorities with more homeownership opportunities.

Thus spake the Bully Boy as he declared June National Homeownership Month. Two months ago, lofty words.

Last week Debbie Bell (The Daily Record) noted that Fremont County has been "hit" "hard" in "the last five years" with home foreclosure and cited the Public Trustee Pat McFarland explaining the would be "working on my 200th foreclosure for 2007 this week." 200th foreclosure in 2007 thus far. That's nearly one for every day of the year and it's not just Colorado. The Chicago Tribune reported yesterday that "Chicago had 34,818 foreclosures, or one filing for every 88 households, for the first half of 2007". ePluribus Media notes that Ohio is now "3rd in Nation Home Foreclosures". Staying with Ohio, Lanka Business Online reports 13,600 foreclosures during the first seven months of 2007 in just "Cleveland and Cuyahoga County alone" -- an area which hasn't seen "so many sheriff's sales since America's Great Depression in the 1930s."

Subprime mortgages are home loans lenders have offered to buyers with questionable credit history. Often the borrower is a first time buyer and the lender focuses on the initial rounds of payments (usually the first two years) which seem swingable but after that period, the borrower discovers that after the initial rounds the interest rates skyrocket. This aspect usually goes unexplained. As Sarah Shemkus (Cape Cod Times) explains today, "Many of these loans featured low initial 'teaser' rates, that increased sharply after a few years, leaving many borrowers suddenly facing larger monthly payments. With interest rates rising, home values dropping and credit standards tightening, a growing number of borrowers were unable to afford this higher payment and went into delinquency or foreclosure." The loans can also be resold and that's often not explained to the borrower(s). As Danny Schechter explained to Amy Goodman (Democracy Now!) last week, "This subprime thing is really serious. I don't know if your viewers are all clear of it, or your listeners, but basically people who didn't have adequate credit to get homes were told, 'No problem. Just pay us a little bit more, and we will give you the mortgage.' Then they took the mortgage. They resold the mortgage back into Wall Street into what are called securitization trusts. These trusts then not only financed more acquisitions and buyouts and the like, but they also basically made incredible amounts of money for these people."

Robert Gavin (The Boston Globe) reported yesterday on one such case where Kim and Stephen Martinelli borrowed from Chase Home Finance and, due to health care for their disabled child, were having trouble when their mortgage payments leaped to $900 a month, the missed payments led to foreclosure notice, Chase Home Fiance refused to work with the family and, "What the Martinellis did not know was that Chase was not calling the shots. Chase merely services the loan, acting as bill collector and administrator. The mortgage was held by an unknown investor, whom Chase declined to identify and who refused to modify the terms of the Martinellis' loan."

Similar stories take place across the country. In Wisconsin, Dan Simmons (La Crosse Tribune) reports on Jane and Randy Wiemerslage who lost their homes after twice responding to mortgage companies promising them lower interest only to be told they were behind in property taxes, they weren't behind and the companies refused to change their records, the Wiemerslage's lost their home and Jane Wiemerslage advises everyone, "Throw all letters from mortgage lenders in the garbage as soon as you get them and never sign a loan paper without a lawyer present" and avoid any loan if it "can be resold on the 'secondary market'."

Alex Benedict (American Homeowners Resource Center) writes today that, "Homeowners will have to pay for their mortgage, which means that fewer homeowners will be able to purchase a home, which means that sellers will have to lower their selling price, which means that some sellers will have to sell for less than they bought, which means that there will be more foreclosures, which means that companies like Countryside will have to take a loss, which means that they will have to borrow more, which means - - - - - If left unchecked, this downward spiral could spin out of control, causing a global crisis in credit as the American mortgage market receives much of its money from global investors."

As the spiral continues, it may be easy for some to assume this is a new problem, an unknown. But nearly a year ago, as Ava and C.I. noted, David Wessel (Wall St. Journal) addressed this in the fourth segment of PBS' Washington Week and noted that, at that time, only the southern portion of the country was doing well.

You didn't need a segment of a PBS half-hour to know there was a problem. Danny Schechter's long been attempting to sound the alarm on the issue. Last week, Amy Goodman noted that the Center for Economic Policy Research says many journalists and economists have long ignored the facts. The housing market has been seriously overvalued for the past ten years. Its collapse will cause a severe recession with grave consequences for millions of families" and that "subprime loans have led to one million American families losing their homes in the past decade."

Danny Schechter discussed the need for debt relief in this country, "In other words Bono has called for debt relief in Africa. We have to start fighting for debt relief in America. A moratorium on these foreclosures would be a first step, and also an investigation into the profiteers on Wall Street." He also charts it at his NewsDissector website and his latest documentary, In Debt We Trust, is about the credit squeeze being imposed on Americans.

He's written of how the US military offers the promise of debt repayment to those that will enlist (many never see any debt repayment) and how the credit crunch effects Americans in every walk of life, every day.

The Chicago Tribune noted that Chicago Mayor Richard Daley declared this weekend that home foreclosure was "a national problem and faulted the federal government for not regulating the issue" asking, "Where was the federal government on this? They completely failed."

Completely failed? While the problem mounted, Bully Boy did nothing . . . except declare June National Home Ownership Month and that bit of symbolism appears to be all that he's planning on doing. Friday in Crawford Texas, White House flack Gordon Johndroe was asked about the possibilities of Freddie Mac (Federal Home Loan Mortgage Corporation) of Fannie Mae (Federal National Mortgage Association) "buying mortgages beyond their current limits, or to do anything else to help provide mortgage finance and other credit markets?" and he responded, "I don't believe the White House is going to have any additional comments on the markets or on the mortgage situation." Apparently a June pronouncement is all the 'effort' the White House can manage.
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