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"What Happens When Landlords Can't Pay The Mortgage?"
Mortgage crisis inflicts collateral damage
Marriages, families, tax revenues fall victim to wave of foreclosures
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Renters feeling mortgage crunch More renters are losing their homes because their landlords can't meet their mortgages. NBC’s Mike Taibbi reports from Minneapolis. Nightly News |
The national surge in mortgage defaults is claiming more victims than just the thousands of subprime borrowers facing the prospect of losing their homes.
Social service agencies say homeless rates are on the rise not only as families lose their own homes to foreclosure but also as renters are evicted after their landlords default. Financial analysts warn that state and local governments will soon feel the pinch of sharply reduced property tax revenue. And counselors say divorces and reports of abuse are rising as families burdened by impending foreclosure take their stress out on one another.
The ripple effect illustrates the wide-ranging impact the subprime mortgage crash has had not only on the U.S. economy but on society at large, said Robert Reich, who was labor secretary during the Clinton administration.
“Understand that houses are the most important assets most Americans have, and they are seeing those assets disappear,” Reich said.
Little recourse for renters
Especially hard hit are families that rent their homes from landlords facing foreclosure. RealtyTrac, a national real estate network that specializes in foreclosed properties, estimates that more than 20 percent of foreclosures involve investment properties; when landlords lose those properties, their tenants lose a roof over their heads with little warning.
Mona Hoeft, a rental assistance technician with the Olmsted County Housing and Redevelopment Authority in Rochester, Minn., said her agency was being swamped with calls for help from families who were being tossed out on the street.
“Unfortunately, there’s not much a tenant can do other than move,” Hoeft said. “There really is no protection for the tenant.”
Congress is considering a measure to require landlords to give tenants 90 days’ notice before they can be evicted. But even if it passes, it will not be in time to help thousands of renters like Sharron Shagonaby, 67, who was never late on the $900-a-month rent she paid on a house in Holland, Mich. She was forced out two weeks ago when her landlord defaulted on his loan.
“I just can’t see how people are so cold that they would actually put me out on the street when I didn’t buy the house,” said Shagonaby, who uses an oxygen tank and is debilitated by diabetes.
“I didn’t forfeit my payment," said Shagonaby, but she fears that she will have trouble finding a new place to live.
“People that you apply to for a house won’t believe that,” she said. “They won’t even look at if you were really evicted — [they think] you’re just making up some story.”
Shelters feel the stress
Darryl Bartlett, executive director of the Holland Rescue Mission for Women, called Shagonaby an example of “a new kind of homeless — those that are the innocent victims.”
“We did not plan for large numbers of people who are being foreclosed on becoming homeless,” Bartlett said. “That was not in our plan.”
Eugene and Kathleen Pobol were packing up their rental home this week in Bakersfield, Calif., after getting an eviction notice.
“We’re between a rock and a hard place, and basically we’re up the creek without a paddle,” Eugene Pobol said.
“Here we are, tenants, paid our rent on time, went through credit checks and everything else, and now, all of a sudden, the landlord’s going bad on a mortgage,” he said.
Officials at the Bakersfield homeless shelter said they were at capacity but that more families wanted in. The shelter took in seven families in one day this week, said Louis Gill, the shelter’s executive director.
“I’m definitely concerned now that we’re receiving phone calls from people going through foreclosure,” Gill said. “We’ll have to see what kind of additional burden that puts on the emergency systems.”
Local governments under the hammer
Government agencies that can help stricken families are also facing a bind, economists said, because the high number of foreclosures removes property tax payers from the rolls.
“The housing market has put a big negative for local government revenues across the board,” said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto.
The nonprofit Center for Responsible Lending said California could lose nearly $3 billion in property tax revenue and another $1 billion in sales and transfer tax revenue thanks to foreclosures.
“Property tax revenues are going to be a lot less than local governments built into their budgets, and there are going to be tough times at the local level,” Levy said.
Atlanta City Council member Mary Norwood said property tax revenues would also take a hit because foreclosed homes drive down property values in a neighborhood, leading to lower assessments on people who do pay up. The Center for Responsible Lending put that price tag at more than $17 billion nationwide.
“You have a lot of vandalism, the house deteriorates, that drags down the neighborhood,” Norwood said. “It affects the property values of the other homeowners in the community.”
Families under siege
The stress of dealing with threatened foreclosure is also taking a serious toll on families.
“It just gets pulled right out from underneath you,“ said Wendy Hatt, whose marriage broke up under the strain of dealing with the prospect of losing the family’s home in Tucson, Ariz.
Hatt’s real estate agent, Amado Calderon, said homeowners squeezed by the mortgage crisis were left at sea.
“It’s one of the most stressful situations for couples, for homeowners,” Calderon said. “They really don’t know their options.”
At the Women’s Center of San Joaquin County in Stockton, Calif., calls to the domestic abuse hot line have jumped 12 percent in recent weeks, fueled largely by the strain on families losing their homes, said Joelle Gomez, the center’s director.
“If they’re not dealing with the stress or talking to somebody about it, it is going to escalate and come out in forms of violence,” Gomez said.
Vivian Ward, a hot line counselor at the center, said families simply run out of money even as they watch their mortgage rates climb.
“A lot of times the abuse starts because they don’t have enough money to make those mortgage payments,” she said. “They’re so high.”
URL: http://www.msnbc.msn.com/id/22246203/
Subprime lending
From Wikipedia, the free encyclopedia
Subprime lending, also called B-paper, near-prime, or second chance lending, is the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history. The phrase also refers to paper taken on property that cannot be sold on the primary market, including loans on certain types of investment properties and certain types of self-employed individuals. Subprime lending is risky for both lenders and borrowers due to the combination of high interest rates, poor credit history, and adverse financial situations usually associated with subprime applicants. A subprime loan is offered at a rate higher than A-paper loans due to the increased risk.
Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others. The term "subprime" refers to the credit status of the borrower (being less than ideal), not the interest rate on the loan itself.
Subprime lending is highly controversial. Opponents have alleged that the subprime lending companies engage in predatory lending practices such as deliberately lending to borrowers who could never meet the terms of their loans, thus leading to default, seizure of collateral, and foreclosure. There have also been charges of mortgage discrimination on the basis of race.[1] Proponents of the subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market.[2]
The controversy surrounding subprime lending has expanded as the result of an ongoing lending and credit crisis both in the subprime industry, and in the greater financial markets which began in the United States. This phenomenon has been described as a financial contagion which has led to a restriction on the availability of credit in world financial markets. Hundreds of thousands of borrowers have been forced to default and several major American subprime lenders have filed for bankruptcy.
As mortgage foreclosures continue to rise at an alarming rate here in America an unforeseen side effect of this economic phenomena has manifested itself in renters who are "caught up" in their rent payments being evicted because of the landlord losing the investment /rental property through foreclosure. Apparently sub-prime lenders have financed unqualified buyers of investment properties as well as other American citizens "living from paycheck to paycheck" getting loans to buy homes they really couldn't afford in the first place and others who could initially afford their home but were unaware of their mortgage loan being an "adjustable rate mortgage" that would skyrocket in a couple of years beyond their means to pay. Several industry experts have suggested that the crisis may soon worsen.
Prayerful positive thinking is what the victims of sub-prime mortgage lending can do now that will initiate the process of recovery, for them and America. Congress now is getting legislation together to help the victims of sub-prime mortgage lending and prevent the crisis from getting any worse. All of the major Democrat Presidential candidates have plans for helping victims of sub-prime mortgage lending if elected. Hold on, keep The Faith, help is on the way. Just remember perceptions of lack and limitations are illusions of the phenomenal world, God is The Infinite Reality, Source And Substance of your life and circumstances.
Ha! Losing ones home is a very stressful situation. I for one have
experienced that fore closure bullshit. It hurts, especially after you
have been doing all you can to keep it; but still lose it.
You are right, "B", tough times are everywhere but I believe with prayerful
positive thinking and actions on a personal and collective level we can
prosper in spite of crooked sub-prime lenders. That which does not kill us
only makes us stronger and smarter. We will own a home again! Believe it!
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