The Washington Post yesterday reported on the dark underbelly lurking below the seemingly bright promise of home ownership in America. Home ownership in America may be up today, but in a nasty flip side to that coin, foreclosures are also on the rise, forcing Americans into financial disaster.
Here are the facts: Foreclosure rates this past March rose in all but 3 states. In places like Florida, Colorado and Texas, foreclosure rates are double the national average. Hurt most are black and Latino families.
What’s the problem?
First, skyrocketing costs across the board — health care, education, retirement – combined with lower wages are leaving many Americans in financially precarious positions. A study done by Harvard University earlier this year, for example, found that half of all respondents facing bankruptcy “said that illness or medical bills drove them to bankruptcy.” To see the effect of this on home owners, just look at Philadelphia, where more than 1,000 foreclosed properties are auctioned off each month (up from 300 to 400 a month in 200). Forty percent said they lost their homes because crushing medical bills pushed them over the financial brink.
Second, blame predatory lenders. Just like credit card companies, which make their big bucks by aggressively marketing their products to high-risk consumers– such as college students, low wage workers and the newly bankrupt, mortgage brokers and banks have been marketing riskier ways for Americans to buy homes. These mortgage companies target buyers with bad credit, then jack up interest rates to 8 — 12 percent (instead of the market rate of 6 percent.) Thus, people with plenty of money are able to buy homes which become a valuable addition to their net assets. Working-class Americans are unable to keep up with outrageously high mortgages end up losing their homes and drowning in debt.