FacebookTwitterGoogle+RedditEmail

Ten Million Families Sliding Toward Foreclosure

Of the 55-million families with mortgages, 10.4-million of them “are sliding toward failure and foreclosure”—a tragedy that will depress the U.S. housing market for years to come, a result of too many houses for sale and too few buyers.

That’s the blunt conclusion of distinguished economics journalist William Greider, to be published in an article in the November 14th issue of The Nation magazine.

America’s “Economic recovery will have to wait until that surplus (excess houses) is gone, because the housing sector has always led the way out of recession,” Greider says. “The more housing supply exceeds demand, the more prices fall. The more prices fall, the more families get sucked into the deep muddy. The vicious cycle is known in the industry as the death spiral. So far, there’s no end in sight.”

Greider says the solution is to forgive the debtors: “Write down the principal they owe on their mortgage to match the current market value of their home, so they will no longer be underwater. Refinance the loan with a reduced interest rate, so the monthly payment is at a level that the struggling homeowner can handle.”

Forgiving the debtors is the right thing to do, Greider continues, “because the bankers have already been forgiven. The largest banks were in effect relieved of any guilt for their crimes of systemic fraud or for causing the financial breakdown—when the government bailed them out, no questions asked.”

Far from a show of gratitude, Greider notes the response of the banks has been ugly. “Right now, these trillion-dollar institutions are methodically harvesting the last possible pound of flesh from millions of homeowners before kicking these failing debtors out of their homes—the story known as the ‘foreclosure crisis.’”

The largest and most powerful banks are standing in the way of the solution and the Obama administration “is standing with them,” Greider adds, “because bankers and other creditors would have to take a big hit if they were forced to write down the debt owed by borrowers.  The banks would have to report reduced capital and their revenue would decline if homeowners were allowed to make smaller monthly payments.”

President Obama, he says, “seems to be playing a sly double game—protecting banks from sharing the pain while proclaiming sympathy for embattled homeowners.” Greider adds, “The government, in effect, has been sheltering banks from facing the hard truth about their condition.” Banks may be valuing mortgages or mortgage bonds at 85 cents on the dollar when their true market value is closer to 30 cents. “That strengthens the case for a general and orderly write-down now: if many of these loans aren’t ever going to be rapid, then the assets now claimed by the banks are imaginary.”

Greider quotes Stephen Roach, a Morgan Stanley economist and lecturer at the Yale University School of Manaagement, who says, “Some form of debt forgiveness would be a clear positive. Debt forgivness is a big deal when so many Americans are underwater and unable to keep up with their payments… With debt reduction, people would feel less reluctant to spend money on new things. If you can do that, then companies will feel more confident about future demand, less reluctant about hiring more workers.”

Roach believes the government can instruct Fannie Mae and Freddie Mac, which hold some $1.5 trillion in housing loans or mortgage-backed securities, to take a write-down on their outstanding loans. “Then the government can put pressure on the banks to do the same thing. The banks will resist, but they have to go along if the government is forceful enough,” Roach says.

However, housing-finance expert Laurie Goodman,  said the government is making it harder for homeowners to get new mortgages despite the sagging housing market. “Almost every single proposed government action has been aimed at further tightening credit availability,” she told the Senate Banking Committee last September.

With 25 million workers unemployed or underemployed, the President enjoys great popular support for  pushing through a massive jobs bill, raising the minimum wage and shoveling money into the pockets of hard-pressed homeowners to help them pay their mortgages. Instead, as Greider says, Obama has been siding with the banks. Worse, he keeps squandering tax dollars on foreign wars opposed by the most Americans. There’s not much left over to stimulate the economy when the Pentagon has sucked up $800 billion in direct costs to wage war in Iraq with indirect costs, estimated by economist Joseph Stiglitz and Linda Bilmes, at a staggering $4 trillion.

Sherwood Ross is a Miami-based public relations consultant “for good causes” who writes on political and military topics. Reach him at sherwoodross10@gmail.com   

Exclusively in the New Print Issue of CounterPunch

THE SLOW DEATH OF THE ROMAN CATHOLIC CHURCH – Nancy Scheper-Hughes on Clerical Sex Abuse and the Vatican. PLUS Fred Gardner on Obama’s Policy on Marijuana and the Reform Leaders’ Misleading Spin.  SUBSCRIBE NOW

Order your subscription today and get
CounterPunch by email for only $35 per year.

More articles by:

November 13, 2018
Patrick Cockburn
The Midterm Results are Challenging Racism in America in Unexpected Ways
Victor Grossman
Germany on a Political Seesaw
Cillian Doyle
Fictitious Assets, Hidden Losses and the Collapse of MDM Bank
Lauren Smith
Amnesia and Impunity Reign: Wall Street Celebrates Halliburton’s 100th Anniversary
Joe Emersberger
Moreno’s Neoliberal Restoration Proceeds in Ecuador
Carol Dansereau
Climate and the Infernal Blue Wave: Straight Talk About Saving Humanity
Dave Lindorff
Hey Right Wingers! Signatures Change over Time
Dan Corjescu
Poetry and Barbarism: Adorno’s Challenge
Patrick Bond
Mining Conflicts Multiply, as Critics of ‘Extractivism’ Gather in Johannesburg
Ed Meek
The Kavanaugh Hearings: Text and Subtext
Binoy Kampmark
Concepts of Nonsense: Australian Soft Power
November 12, 2018
Kerron Ó Luain
Poppy Fascism and the English Education System
Conn Hallinan
Nuclear Treaties: Unwrapping Armageddon
Robert Hunziker
Tropical Trump Declares War on Amazonia
John W. Whitehead
Badge of Shame: the Government’s War on Military Veterans
Will Griffin
Military “Service” Serves the Ruling Class
John Eskow
Harold Pinter’s America: Hard Truths and Easy Targets
Rob Okun
Activists Looking Beyond Midterm Elections
Binoy Kampmark
Mid-Term Divisions: The Trump Take
Dean Baker
Short-Term Health Insurance Plans Destroy Insurance Pools
George Wuerthner
Saving the Buffalohorn/Porcupine: the Lamar Valley of the Gallatin Range
Patrick Howlett-Martin
A Note on the Paris Peace Forum
Joseph G. Ramsey
Does America Have a “Gun Problem”…Or a White Supremacy Capitalist Empire Problem?
Weekend Edition
November 09, 2018
Friday - Sunday
Louis Proyect
Why Democrats Are So Okay With Losing
Andrew Levine
What Now?
Jeffrey St. Clair
Roaming Charges: Chuck and Nancy’s House of Cards
Brian Cloughley
The Malevolent Hypocrisy of Selective Sanctions
Marc Levy
Welcome, Class of ‘70
David Archuleta Jr.
Facebook Allows Governments to Decide What to Censor
Evaggelos Vallianatos
The Zika Scare: a Political and Commercial Maneuver of the Chemical Poisons Industry
Nick Pemberton
When It Comes To Stone Throwing, Democrats Live In A Glass House
Ron Jacobs
Impeach!
Lawrence Davidson
A Tale of Two Massacres
José Tirado
A World Off Balance
Jonah Raskin
Something Has Gone Very Wrong: An Interview With Ecuadoran Author Gabriela Alemán
J.P. Linstroth
Myths on Race and Invasion of the ‘Caravan Horde’
Dean Baker
Good News, the Stock Market is Plunging: Thoughts on Wealth
David Rosen
It’s Time to Decriminalize Sex Work
Dan Glazebrook
US Calls for a Yemen Ceasefire is a Cynical Piece of Political Theatre
Jérôme Duval
Forced Marriage Between Argentina and the IMF Turns into a Fiasco
Jill Richardson
Getting Past Gingrich
Dave Lindorff
Not a Blue Wave, But Perhaps a Foreshock
Martha Rosenberg
Dangerous, Expensive Drugs Aggressively Pushed? You Have These Medical Conflicts of Interest to Thank
Will Solomon
Not Much of a Wave
Nicolas J S Davies
Why Yemeni War Deaths are Five Times Higher Than You’ve Been Led to Believe
FacebookTwitterGoogle+RedditEmail