Nov 17, 2008
The number of people losing their homes to the subprime crisis continues to grow. Between July and September, every day, 2,700 families in the United States lost their homes because they no longer could make their house payments. In the previous year, the figure had been 1,200 per day. The financial system had lured them into home ownership with all kinds of false promises.
Several television programs showed owners being kicked out of their homes. Often, they were absolutely furious. They knew that while the government is bailing out the financial companies hit by the crisis, ordinary home owners are getting nothing. Bush has made a few vague statements. But no serious measures have been taken to help homeowners, not even a moratorium on foreclosures.
The subprime crisis has struck five states particularly hard: California, Florida, Ohio, Georgia and Michigan. In Detroit, more than 70,000 families lost their homes over two years. In 2006, Detroit had more homes sold with subprime mortgages than any other city.
Brokers and mortgage companies certainly weren’t trying to aid people of modest means to become home owners. The subprime mortgages had low introductory teaser rates, which then reset to exorbitant levels that were sometimes twice as high. And the ever increasing gap between what people owed on their mortgage and the real value of the home, after housing prices collapsed, led many to give up making payments.
Real estate brokers used every trick in the book to get home buyers to take subprime mortgages. Some brokers lied to the buyers by pretending that a subprime mortgage was really a traditional fixed-rate mortgage. Or else they claimed that a subprime mortgage saved the buyers money.
The brokers and mortgage companies pushed subprime mortgages because they were paid much higher fees and commissions. There was little concern over whether the buyer could make the house payments. The loans were sold to financial institutions, which bundled the mortgages and sold them off to wealthy investors. Eventually, the whole market collapsed.
With all the vacant homes, entire neighborhoods have been devastated. Financial companies have put the houses up for sale or auction, offering speculators or ordinary private parties greatly reduced prices. But in many cases, the auctioneer has not even been able to get a bid, not even for a symbolic dollar. These homes are often in terrible shape, either because the angry former owners trashed them before leaving, or because looters came to take what they could – the metal pipes and wires, even the bricks from the walls.
Meanwhile, those who lost their homes have had to try to find a rental, live out of a trailer, or depend on the good will of a relative or a compassionate neighbor. Some have been reduced to living in a shelter so they do not have to pass the night on the street, while their old home remains empty and abandoned.
What an outrage!