The Problem

Sadly, the problem of American homelessness is getting BIGGER, not smaller.

Tonight, millions of American adults, youth, and veterans have no place to call home:

• - The New York Times

  Thousands of families are without shelter due to catastrophic events and natural disasters, such as the floods in Nashville, TN, or Hurricane Katrina in Louisiana

• 50,000 youth experience long-term homelessness. Millions of young people experience at least one night of homelessness per year

• 131,000 veterans are homeless, making up 20% of the homeless population

• 671,859 Americans experience homelessness on any given night. 22 of every 10,000 people are homeless

• 3.5 million Americans faced foreclosure over the last two years. Only 10% of these families entered the federal loan modification program

• 11 million American homeowners owe more than their house is worth - that's 21.5% of mortgage borrowers. Known as being “underwater," this “negative equity” statistic is a prime predictor of future foreclosures. Las Vegas leads the nation with 73.9%, followed by Phoenix (66.8%), Orlando (64.6%), and Reno (61.9%).

Millions of American homeowners now face the threat of foreclosure. To date, federal relief efforts have been unable to stem the tide.

According to Elizabeth Warren, Congressional Oversight Panel Chair, the foreclosure problem is getting worse:

• 1.7 million American families faced foreclosure last year
• 1.8 million American families will face foreclosure this year
• Only 10% of these families entered the federal loan modification program

"Treasury is struggling to get foreclosure program off the ground."

Treasury has been at this for 15 months – they managed to get 167,000 families into permanent modifications. To put that in context, for every one family over the last year, they got into a modification, 10 families lost their homes to foreclosure.

We have a problem that is continuing to grow.

1.7 million families lost their homes last year in foreclosure, we’re on target right now to see about 1.8-9 million families this year to foreclosure. We’re adding 200,000 families per month that are posted for foreclosure.

In other words, it is a big problem and we’re not getting ahead of the problem.

Ultimately we’ve have to remember this is not simply about the homeowners who are themselves in trouble. This is about the larger economy. We have no construction industry so long as the home mortgage market is going down, and home furnishings, and home centers. Foreclosures push down the value of homes, and as the value of homes sink, there are more foreclosures, and they in turn keep pushing it down. The fear is that we are on a negative spiral.

"This has a long term depressive effect on this market.”- Elizabeth Warren, Chair of the Congressional Oversight Panel

How We Got Here

In his 2007 report, Senator Charles Schumer predicted that 2 million Subprime Homes could go into foreclosure nationwide by the end of 2009.  Property values, personal wealth, and tax revenues poised for big declines.

“The report,  ‘The Subprime Leading Crisis: The Economic Impact on Wealth, Property Values and Tax Revenues, and How We Got Here’ found that the property values could take a hit of more than $9 billion through 2009, with more $100 million less in property taxes coming in to pay for local schools.  Schumer said that of the $9 billion lost in property values $5 billion will come directly out of home prices with the other $4 billion lost to the overall community.  Schumer said that foreclosure prevention can save the economy billions in housing wealth and help prevent further downward pressure of housing prices.”

“..we are headed for billions in lost wealth, property values, and tax revenues.” Schumer said.   The current tidal wave of foreclosures will soon turn into a tsunami of losses and debt for families and communities.

• Approximately $71 billion in housing wealth will be directly destroyed through the process of foreclosures.

• More than $32 billion in housing wealth will be indirectly destroyed by the spillover effect of foreclosures, which reduce value of neighboring properties.

• States and local governments will lose more than $917 million in property tax revenue as a result of the destruction of housing wealth caused by subprime foreclosures.

Significance

Schumer said that conventional foreclosures have a statically and economically significant effect on nearby property values.  In particular, they found that each conventional foreclosure within a one-eighth mile of a single-family home produces at least a 0.9 percent lower property value, and may be closer to 1.5 percent in low to moderate income communities.

Update

Here are some recent articles that show how Senator Chareles Schumer predicted this foreclosure crisis.

Goldman Cited ‘Serious’ Profit on Mortgages by Louis Story and Sewell Chan, The New York Times - April 24, 2010

“Senator Levin said in a statement…”These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market.”

“[The messages] show that in 2007, as most other banks hemorrhaged money from plummeting mortgage holdings, Goldman prospered.

Goldman Sachs’ ‘Fraud’ Explained: How They Pulled Off The Alleged Scheme by Arthur Delaney, The Huffington Post - April 28, 2010

“Goldman Sachs defrauded investors by failing to disclose a conflict of interest on mortgage investments it sold as the housing market went sour, according to the civil complaint filed by the Securities and Exchange Commission on Friday”

“Goldman allegedly failed to disclose to investors that it was betting against subprime mortgage investments it pushed on clients.  Essentially, according to the complaint, Goldman pushed a product designed to fail.”

House of Cards

“CNBC presents the definitive report on the defining story of our time. CNBC correspondent David Faber investigates the origins of the global economic crisis, with first person accounts from home buyers, mortgage brokers, investment bankers and investors – most of whom let greed blind them, leading to the greatest financial collapse since the Great Depression.”

PBS News Hour

TARP Watchdog: Foreclosure Program ‘Too Small, Too Slow’

“The problem we have got — let me put it this way. This is a program that is saving a tiny number of people, ultimately, by getting them into affordable mortgages that the estimates are they will be able to sustain over time.

And for every one of those families that goes in, there are many, many more families who never make it. And the kinds of numbers we’re looking at, we’re looking at mortgage foreclosures that stay well over a million families this year, next year, the year after that, the year after that.

That has implications, not only for those families, but for the financial institutions that are holding those mortgages, for the construction industry, for our overall economy. We have a serious problem and a limited amount of time to get ahead of it. HAMP is not getting ahead of it.”