Monday, February 13, 2012

Foreclosures Transfer Wealth and Wreck Communities

Foreclosure Deal to Spur US Home Seizures By Prashant Gopal and John Gittelsohn, Bloomberg News 11 February 12

[excerpted] "The $25 billion settlement with banks over foreclosure abuses may result in a wave of home seizures, inflicting short-term pain on delinquent U.S. borrowers while making a long-term housing recovery more likely....

Principal reductions and other loan modifications will be accessible to a small universe of borrowers because the deal doesn’t include loans owned or guaranteed by Fannie Mae (FNMA), Freddie Mac or Ginnie Mae, which pools and sells Federal Housing Administration loans...

...Home prices have dropped 33 percent from their July 2006 peak, according to the S&P/Case-Shiller index of values in 20 U.S. metropolitan areas. About 11 million U.S. homeowners have negative equity, or owe more on their mortgages than their homes are worth, according to CoreLogic Inc. (CLGX), a real estate data provider..."
MAJIA HERE: the banks and the quasi-governmental organization such as Fannie Mae, Freddie Mac, and Ginnie Mae must be required to write down principal to halt the escalation of foreclosures.

People who purchased in the boom were deceived by real estate agents, appraisers, and mortgage loan officers who all conspired to justify artificially high home prices, relative to household income.

Now, we are in the midst of a recession that is as deep as the 1930s era Great Depression, once one strips away the economic hype aimed at depoliticizing an impoverished population.

Debts that cannot be paid, will not be paid.

The only solution is to write down debts so that homeowners are able to continue occupying their homes. 

A failure to write down debts is ruining neighborhoods, as illustrated by the empty homes that stand in my neighborhood. It also disrupts lives, sometimes severely.

Allowing banks to foreclose on properties simply increases the number of empty properties that become an economic and community blight. Foreclosures also contribute to the centralization of capital as any wealth stored in a home is seized by banks.

Neighborhoods decline when banks foreclose, impacting entire communities. Banks typically do not maintain property, allowing trash and weeds to accumulate and landscaping to die off from lack of water. I have witnessed this pattern in my neighborhood over and over again.

Escalating foreclosures when re-financing exists as an option simply hurts every other homeowner in a development.

We have neighbors who lost their house because Bank of America refused to work with them. Their house stands empty, one of 3 empty houses on a block of five houses.

When will the government work for the common good, rather than for the economic profiteering of the industry responsible for wrecking the economy?

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