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Last July, approximately 1.5 million homes, 1 in 352 homes, were in a stage of foreclosure, and 14.9 million of all mortgages—31 percent—are underwater. The foreclosure rate right now is on course to overtake 2010’s high of 2.9 million foreclosures among 3.8 million filed. Combining these two figures, and estimating an average of 4 family members per home, we are looking at a future of 65.6 million new victims entering homelessness or on the verge of homelessness.
Economist Dean Baker, co-director at the Center for Economics and Policy Research, identifies only two policies in effect for underwater homeowners: foreclosure or mortgage modification. Both procedures, according Baker, are dismal failures on many scores and continue to fuel loss of homes and the degradation of home values. Mortgage modification, basically written by the banking and mortgage industries, was never meant to be universal. Only a small percentage of homeowners, after numerous hurdles, manage to qualify in the programs.
As a simple example, a home valued at $400K at the time of purchase may be as low as $200K-$300K after mortgage default. At auction, the property may go for $100K and often sold to a person affiliated with the bank. The new owner can either enter the home into the rental market or flip and resell it at $150 to a speculator. Everyone has made money through the transactions except the original owner.
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