Snow isn’t the only storm that is raging across the country. We’re witnessing a growing fury about the injustice of the crisis. People watch as the very Wall Street speculators whose excesses helped cause the economic collapse get billions in
Snow isn’t the only storm that is raging across the country. We’re witnessing a growing fury about the injustice of the crisis. People watch as the very Wall Street speculators whose excesses helped cause the economic collapse get billions in help from taxpayers. Now, as an estimated 2.9 million Americans face foreclosure this year – on top of the 2.3 million homes that went to foreclosure last year – and property values are plummeting across the country, we watch as the banks resist doing anything to help homeowners who are losing their homes with no place to go.
Conservatives in both parties tend to scorn the homeowners in trouble. An obscure analysis became an overnight sensation calling for “tea parties” to protest Obama’s effort to help homeowners keep their homes. Those in trouble are derided as fools who bought a house they couldn’t afford. Disdain is heaped on those who were misled about the terms of their loans rather than on the brokers who got bonuses for misleading them. Lending standards were thrown out the window because major banks could pocket billions marketing mortgage-backed securities of whatever quality, and now they want to blame the borrowers and not the lender.
But most borrowers were simply making the same calculation that the banks made. They assumed that housing prices would keep going up. Many were promised that they could remortgage their homes to avoid the interest rate hikes in variable mortgages. But the bankers and Alan Greenspan of the Federal Reserve who should have known better were wrong. The bubble burst. Now millions of homes across the country are underwater, worth less than their mortgages. So homeowners can’t remortgage and can’t afford to sustain their loans when the interest rates adjust upward. And worse, their distress is driving down home prices across the country.
In the old days, the local bank would meet with the homeowner and investigate the circumstances. Generally, they’d work out the loan – extend the length of the mortgage, reduce the interest rates, right off some of the principle if necessary – to the loan working and the family in their home. The bank might lose some money, but not nearly as much as it would lose in a foreclosure.
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