BOSTON - Bank crashes in Iceland,
an International Monetary Fund (IMF) bailout of Ukraine and volatile
stock markets the world over -- it all links back to the U.S.
communities where hundreds of thousands of families are losing their
homes with no let up in sight, those on the frontlines say.
'Foreclosure has been a
huge issue, a ballooning, mushrooming issue for at least two years.
We've been inundated with phone calls for help,' said Tracy Garrett, a
housing advocate with Community Action House, a non-profit in Michigan.
reports point to a global economy that is tumbling downward. On Sunday,
Ukraine negotiated a 16.5-billion-dollar bailout from the IMF, and
Hungary is next in line for help. On Monday, more U.S. banks lined up
for a slice of a 125-billion-dollar handout from the government, while
the U.S. stock market slid further.
Many experts and advocates
agree that foreclosures are at the root of the global financial mess,
but so far Congress and the George W. Bush administration have focused
attention and dollars on banks and Wall Street.
foreclosures of these past four years can drive the U.S. economy to the
brink of a depression, what can we expect from a dramatic increase in
those numbers?' said John Taylor, president of the National Community
Reinvestment Coalition, an organisation of housing advocates.
Today, foreclosures are happening at an alarming rate.
released last week from RealtyTrac shows that foreclosures during July,
August and September of this year rose 71 percent over the same time
last year. In those three months, 765,558 U.S. households were in
foreclosure or in trouble with their banks, according to RealtyTrac,
which compiles home sale data.
U.S. officials estimate that 2.5 million more households will face foreclosure in the next 12 months.
of the foreclosures are the result of questionable loan terms, made by
financial institutions at a time when housing prices were rising and
interest rates were low. These sub-prime mortgages were made into
investments by the financial institutions and traded as highly risky
packages around the globe. Millions of families are now proving unable
to meet the mortgage terms and are defaulting on their loans, and the
value of the houses has plummeted to far below what they paid for them.
and financial institutions worldwide own the credit default swaps and
other unregulated investments that were fashioned from the mortgages,
and are unable to sell them due to fear on the market that they are
Former Treasury Secretary Alan Greenspan has faced
criticism for embracing an extreme free-market ideology that allowed
the mortgage and financial industries to lead the world into a global
Speaking to a Congressional panel last week,
Greenspan took no responsibility for the crisis and instead reported
his observations of what has happened and what is likely to happen.
mortgage loans were 'undeniably the original source of the crisis,'
Greenspan said. 'Given the financial damage to date, I cannot see how
we can avoid a significant rise in layoffs and unemployment.'
'A necessary condition for this crisis to end is a stabilisation of home prices in the U.S.,' he said.
government has some programmes in place to assist struggling
homeowners, including a 350-billion-dollar plan that got underway Oct.
1, which has strict eligibility requirements. So far the Bush
administration has encouraged, but not required banks to re-negotiate
unfair mortgages with homeowners, even banks that have received
billions of dollars through a 700-billion-dollar Wall Street bailout
programme approved by Congress.
'We expect all participating
banks to continue to strengthen their efforts to help struggling
homeowners who can afford their homes [to] avoid foreclosure.
Foreclosures not only hurt the families who lose their homes, they hurt
neighborhoods, communities and our economy as a whole,' said Treasury
Secretary Henry Paulson on Oct. 20.
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Sheila Bair, a top
administration official as the chair of the Federal Deposit Insurance
Corporation, told a Senate panel last week that the government should
do more to help homeowners.
'Some of the voluntary efforts have helped but we are falling badly behind,' Bair said.
interpreted her comments to mean that the Bush administration will soon
put forth a plan to further encourage or mandate that banks modify
loans for struggling homeowners, something Taylor and other housing
advocates have recommended.
'Assisting homeowners to stay in
their homes would have been a more effective and equitable way to
prevent the collapse of financial institutions and seizure of the
credit markets,' Taylor said.
Banks are not voluntarily
modifying problematic mortgages, experts and advocates say. In
Massachusetts, virtually no lenders have voluntarily modified
mortgages, according to Massachusetts Attorney General Martha Coakley.
the last three months, lenders issued 4,721 new foreclosure notices in
Massachusetts. During that time, only 144 loan modifications were
filed,' said Coakley in a letter to the Boston Globe.
reviewed those 144 modified mortgages and found that virtually none
reduced the monthly payment owed by the homeowner,' Coakley said.
Unless payments are lowered, most homeowners in trouble will default,
'Many families struggling to hold onto their homes and
savings are not looking for charity or a bailout, and that is not what
loan modifications are about,' Coakley said.
In U.S. neighbourhoods, non-profit groups say they are scrambling to help people facing foreclosure.
mortgage bureaucracy is 'a tangle' and extraordinarily challenging to
navigate, Emily Rosenbaum, executive director of A Coalition for a
Better Acre, told IPS.
Typically a mortgage has been bought
and sold many times, and it may no longer be obvious which bank is the
owner. If a homeowner wants to negotiate a loan, many phone calls must
be made just to reach the current holder of the mortgage, Rosenbaum
'It might be someone in Ohio and they don't even know the value of the property. It's quite a nightmare,' Rosenbaum said.
if finding the bank that owns the mortgage isn't enough, 'Getting to
the right person at the bank is a problem,' she said. 'In America you
don't get a person on the phone anymore,' she said. Instead, calls are
directed to a recorded message.
Once reached, and asked about re-negotiating the mortgage, the bank takes time to consider the request, Rosenbaum said.
one makes a decision. We wait three to four weeks for the case to be
assigned in the bank, then another six weeks about the decision,' she
said. 'This hurts the homeowner because they get further and further
behind. It's essentially hurting the whole lending system that's