The Human Side of the Current Crisis

Wall Street types often give short shrift to the social consequences of a faltering economy. It's one thing to note that this month's payroll data was soft, or consumer prices rose more than expected, or home prices are under pressure. It's another to say that more and more families are being thrown into the street, the rising cost of food, shelter and fuel is forcing people to go hungry, and many personal relationships are being sorely tested by stress and rising violence.

In "Mortgage Crisis Inflicts Collateral Damage," MSNBC goes beyond the cold, hard numbers to show us the human side of the current crisis.

Marriages, families, tax revenues fall victim to wave of foreclosures

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.

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.”

Comments

[Rocky]

I wonder how many of these unfortunate souls voted Republican in 2000 and later? If they did, I don't think they voted for the GOP because they were looking for an end to the "death tax" or a cut in their dividend taxes. How many retail clerks in Mississippi do you think have an estate tax problem? They undoubtedly voted for the politicians who supported overturning Roe v. Wade and making sure gay marriages stayed illegal in 49 states and at the Federal level. Mixing religion and politics is not a wise idea even in good times. Now they are going to pay the price. Perhaps Mr. Romney or Mr. Huckabee will help them with their bills. Or as one misguided woman being interviewed by the media about her mortgage problems said, "The Lord will provide". Sure lady.

[farang]

Here's a wild idea: Why not "encourage" the lenders foreclosing on homes with renters making timely payment, to just allow the renter to take over the loan? What's the worse that can happen? The renter stops paying, and then you evict/sell? I once rented a home for 7 years, and would have leaped at a chance to become a buyer. In fact, left to purchase another home.

Seems like cutting off your nose to spite your face when you evict a woman tenant living on disability, which is probably funded through government funds. Hell, if she makes 10 years of payments, perhaps the market returns by then, and the house sells for full value of mortgage.

What a novel idea: Long range strategies.

No no, much better to see what bonuses we can "earn" by next quarter through new "mortgage models" of lending to unqualified buyers.....once upon a time in America, that was called Fraud. Criminal.

[Joshua]

I don't understand this. What good is it going to be for anyone, rich or poor, for the bank to own half the houses in the country, while everyone else sleeping on the streets?

[Angie]

Homelessness should be a crime. Who's at fault when there are enough homes in the U.S. to house everyone while children sleep on the street. When you struggle to pay a sky-high mortgage for years and then lose your home to foreclosure, it's like you were only renting the whole time. The bank keeps your money and will also keep all the money when they sell it. It's already crazy how we have to pay 3 times as much as our homes are worth to own it. The poorer you are the more you will pay for anything. It's the most effective tool for keeping the rich rich and the poor poor. By the way, I totally agree with the first person to post a comment. The right-wing gov. uses emotional/religious issues to drive their economical agendas. Uncool. Lets get smart and hire a president who can actually run this country.

[ali]

Obama will lead the way.

[Mary]

Help....I'm widowed after the stock crash in March 2001 a sleazy broker lost my life savings....How my life and my childrens lives have changed...Money went poof and there was nothing we could do about it. Now with recession upon us living on a shoestring.. Feeding a family of four is ridiculous, electric, gas off the roof interest in credit cards a joke and don't ;et me start on gas prices. Help Help Help
Hope the new president whomever will do the right thing and help the truly unfortunate in this country our country first.

[TheStrong]

Those people should have read the contract. They bought homes they couldnt afford. The real criminals here are the people who read the rich dad poor dad books and all of a sudden they want in on the action. a contract is a contract you cant pay you lose. You didnt know the house you rent is an investment property? and you are how old? Thats some junk a 21 year old can get away with saying.. not a hardened verteran of the United States that should know that capitalism works this way.