Foreclosures - AnAmerican Tragedy

Had the following letter published in The CT Post this morning:

Foreclosures - An American Tragedy

Last week it was reported that 2.8 million homes were lost to foreclosure in 2009.  This brings such actions to over 5 million homes that had previously been lost to foreclosure since 2007.  Over the next five years there are forecasts that this number could grow to over 15 million homes.  This is an American tragedy that in our opinion is of epic proportions.

Back in 2007 when this problem started to exponentially grow, most of the foreclosures were the result of sub-prime loans, interest-only loans and option adjustable-rate-mortgage loans that became too expensive for the homeowner when the interest rate was reset.  Today that is not the case.  Homeowners are losing their homes today because of our economy in which people, through no fault of their own, are losing their jobs and cannot find new ones.  The reported unemployment today is at 10%, but the real unemployment is around 17% when you include those who have given up trying to find a job or have had their unemployment benefits come to an end.  The December reported unemployment for CT is 8.9%, up from 8.2% in November.  On Friday, 1-22-10, the government announced that unemployment rose last month in 43 states, including CT, and the District of Columbia.

To-date, the major response that has come from Washington has been the Home Affordable Modification Program (HAMP.)  The goal of this program is that by the end of 2112, it will have helped up to nine million homeowners keep their homes by reducing their monthly mortgage payments primarily by lowering their loan's interest rate.  This initiative calls for homeowners to first be enrolled in a three-month trial modification program in which they have to demonstrate that they can stay current with their reduced mortgage payments.  If they succeed, they then get a permanent reduction.

The results of HAMP to-date are abysmal!  As of December 31, 2009, only 853,700 have been enrolled in the trial modification program and of these, only 66,465, or 7.7%, have qualified for the permanent reduction.  And, already a significant number of the 66,465 homeowners have started to default on their reduced mortgage payments.

When you read the stories about foreclosures, they almost always talk only about the number of homes being foreclosed on.  As REALTORS®, we are in these homes on a continual basis.  And, what we see are not just homes that have been foreclosed on, but families and individuals who have been displaced from what for most, is their most cherished possession, their home.

Something needs to be done to stop this tremendous toll that families and individuals have to bear.  Possibly the only real solution will be a program to reduce loan principals, not just interest rates.  We know that some will say, why should I pay taxes so that someone else's loan principal can be reduced.  To those people we say, "You are already paying a price for foreclosures."  In 2009 the median sale price of a single-family detached home selling in Fairfield County was $430,000, down 14.0% from the median sale price of $500,000 in 2008, which in turn was down 10.3% from the median sale price of $557,540 in 2007.  For New Haven County, the numbers are $225,000 in 2009, down 11.8% from $255,000 in 2008, which in turn was down 7.3% from $275,000 in 2007. 

One of the prime components of these price drops is foreclosures.  Over the past three years, foreclosures have occurred and are continuing to occur in every town in both counties.  Local foreclosures negatively impact the value of every home in the town.  So "Yes," we are all already paying for foreclosures with the decrease in the value of our homes.  Getting rid of local foreclosures would be one of the instrumental factors in returning the equity we have lost to our homes.

However, what really needs to be done is that the unemployed need to be able to find new jobs.  Without employment, no bills, including mortgages, get paid.  Mortgages not being paid lead to foreclosures.

We are avid readers of newspapers and on-line news sources.  We would dare say that over the past six or so months, when we looked at the headlines in The New York Times, or went on-line to www.politico.com, the overwhelming number of headlines were about health care reform.  In the last few days, many of the headlines have been about Scott Brown's win in MA and President Obama's proposed new regulations on banks.  One has to search long and hard over the past six months and even today to see the word "jobs" in any of the headlines.

In 1992, Bill Clinton rode into the White House on the slogan, "It's the economy, stupid."  This caught the attention of the media, of everyday Americans and of the politicians in Washington.  Suddenly everyone focused on the economy and as a result we entered in a period of almost historic economic growth for the country.

It seems to us, that this is the approach that is needed now.  Someone with standing and whose voice will be heard and listened to, needs to come forth with "It's all about jobs, stupid." As an aside, we saw an article by Lou Barnes, nationally syndicated columnist, in the 1-22-10 issue of Inman News titled, "It's the recovery, stupid."  His thoughts and the thoughts expressed herein are very similar.  To read Mr. Barnes article, please click the following: http://is.gd/6PJYX.  Also, in the 1-23-10 edition of The New York Times we were pleased to see an editorial, "Here's How to Help" on this tragic foreclosure issue.  To read the editorial, please click the following: http://is.gd/6RPAR.

As stated in the Times, "... One important way to do that is to help hard-pressed families hang on to their homes."  The editorial goes on to say, "It's not just the moral thing to do. It also would help avoid the spillover effects of the next expected round of defaults. Coupled with high unemployment, a coming surge in foreclosures is likely to further depress house prices. That would hurt an already fragile recovery and, in a worst case, could provoke a double-dip recession."

This issue needs to dominate our attention.  Politicians in Washington and business and banking leaders need to fully realize the daily joy they experience of being able to go home every night to the same house they went home to last night.  To really think of that sense of relief of knowing that their children were able to wake up this morning in the same home they woke up in yesterday and were able to go to the same neighborhood school they went to yesterday.  Yet for the nearly 11,000 families and individuals who lose their homes on a daily basis to foreclosure, they cannot go home to that same home tonight and tomorrow their children cannot go to the same neighborhood school because they no longer live in the neighborhood.

By the way, from the numbers above, one can calculate that for every permanent loan modification last year, 43 families or individuals lost their home to foreclosure.  Don't these numbers seem backwards to you?  They certainly do to us.

As we said above, foreclosures are an American tragedy and it needs the full attention and awareness of all of us to get it fixed?  Yes, "It's all about jobs, stupid."

Bob and Judy Mori

Trumbull, CT