The Future Of Foreclosure In the United States
The truth is, the foreclosure crisis is not over.
The end of the Great Recession, on the books recorded as June 2009, seems to be a premature end-date for those still feeling first-hand the financial backlash of the economic downturn.
Homeowners suffered significantly during the Great Recession; foreclosure rates skyrocketed, many of which compared to the foreclosure rates during the Great Depression (to read more about this, click here); and it has become evident over the years that things are going to take a long time to return back to normal.
While foreclosure rates have decreased since their acme during the Great Recession, they still remain over three times their normal levels (as David Dayen noted). Further, those whose loans exceed the value of the home- known as being underwater, continue to make up an enormous amount of homeowners; their number exceeded 8.7 million in 2015.
RealtyTrac found that for the first time in 3 years, foreclosure auctions were increasing, along with foreclosure filings. The signs spell out trouble- but the government and polls continue to say that we are out of the recession and that things are looking up.
The Problem Began Before The Recession Hit
The way that mortgages were handled changed significantly during the housing bubble. Many brokers sold too-good-to-be-true mortgages during the housing bubble to people who normally wouldn’t qualify: they preyed on people with low wages, people of Latin American decent, African Americans, those who were immigrants, working-class people making minimum wage. Interest rates were often incredibly low, and adjustable rate mortgages with initially low teaser rates were common; but many of these rates will be resetting to higher ones, rates which many homeowners will not be able to afford. Some economists believe another foreclosure spike is imminent.
Everyone is working against the homeowner.
Although many homeowners will have the desire to save their homes from foreclosure, it is evident that the financial institution may be working against them. Because of increases in the price of real estate, those whose homes are in foreclosure face the possibility of the bank seizing their home; it is now more financially favorable for the banks to just seize and sell your home, rather than helping you through the foreclosure process. This practice is seen going on all over the country. Banks want to settle the mortgages and foreclosures once and for all, and their way of handling this is by driving the homeowner into eviction.
To make matters worse, the loan servicers, those in charge of approving and denying homeowners for loan modifications in order to avoid foreclosure, continue to make it nearly impossible to obtain a modification. (To read more details about the corruption of loan servicers, click here). Many servicers continue to deny homeowners for no reason, despite the fact that they may qualify, and mishandling the documentation that borrowers send in, and neglecting to carry through with loan modification agreements that were reached with the homeowner.
Maybe most aggravating, is the fact that there are no laws governing their actions, and no penalties to face for committing such shameful wrongdoings to the homeowners.
What’s To Come?
It is likely that those dealing with mortgages from the time during the housing bubble will continue to suffer down the road.
National recovery has been slow, and even slower in those areas that received the greatest blows; which is inherent in the nature of the beast– subprime lenders targeted people in areas that were very poor to begin with, so when the recession hit, the people struggled to a greater extent than those living in wealthier areas.
It is unfortunate that those who suffered the greatest in the Great Recession are being helped the least, and that no one wants to step up to the plate and take the blame. Taking the blame may actually require them to try and fix the problem, instead of just pointing fingers. And who in government or from the banks wants to do that? It’s much easier to sit idly by while people continue to struggle.