George Wolf
Jul 11,2008
In: Foreclosure Crisis

The Snowballing Effects Of Foreclosures

Foreclosures are causing alarm because it is not confined within the playing courts of borrowers and lenders but is spilling over to engulf all aspects of the socio-economic scene.

The country had experienced an increase in foreclosure in the nineties but then the problem had not taken on this magnitude because the economy was holding and the houses could be sold in the market to clear the loan. But today with the value of the house having fallen to below the loan amount the property apparently has become worthless. This coupled with closing down of industries have affected the real estate market that is already satiated with foreclosed units. Daily more are coming in making the situation grim.

The fate of the borrower does not require elaboration. The family is evicted leading to strains in relationships. Marriages are broken, elders neglected and children traumatized. Some of the borrowers unable to face the situation have even committed suicide after killing their pet dogs. Animals too are suffering being abandoned or left to die in chains in empty houses. The middle classes have started living in their cars while organizations are trying to oversee the matter of safe parking zones. Shelters for the homeless have no vacancies resulting in a rise in vagrancies and crime. Some have started dustbin picking. The borrowers have vented their frustration more often than not on vandalizing the houses before departure.

The lenders too are an unhappy lot. They have swallowed more foreclosed houses than they can digest. Foreclosed houses mean no mortgage payment is coming in each month. This has led to a credit crunch. Many mortgage companies have downed shutters. The innumerable houses are failing to attract buyers. The lenders do not have the infrastructure to deal with these millions of abandoned houses. Most are left abandoned and this raises the ire of the neighbourhood and the government. Politicians too chip in fishing in troubled waters. So there is a general feeling of ill will towards the lenders from all sides – the community as well as the government. Legal pressure is being put on lenders making it mandatory to see to the maintenance and safety of the houses. This means money – expenditure at a time when money is not coming in.

In desperation the banks are trying to offload the weight of foreclosed houses by offering heavy discounts. This brings down the price of neighbouring houses that have not gone into foreclosure. It negatively impacts the real estate market. The abandoned houses invite health problems and criminal activities. Stagnant pools have become happy hunting grounds for frogs, snakes and mosquitoes while the mouldy derelict houses have become dens for thieves, prostitutes, drug peddlers and you name it. The houses are being stripped of its fittings in a frenzy of destruction. Neighbours are afraid and want to move it. A typical example is the Slavic Village, Ohio.

With sales down the government tax kitty is getting thinner and thinner and yet workload of looking after the eerie neighbourhood more challenging.