Just in time for the Week of Action, a new report highlights the continuing consequences of inaction on the foreclosure crisis.
As hundreds of struggling homeowners and allies are preparing to arrive in Washington as part of the Justice to Justice Week of Action to protest the Department of Justice’s reluctance to prosecute Wall Street bankers responsible for the financial crisis, a new report released by the Home Defenders League, Alliance for a Just Society, and New Bottom Line details how the foreclosure crisis is still devastating our communities and our economy.
The Report, titled Wasted Wealth: How the Wall Street Crash Continues to Stall Economic Recovery and Deepen Racial Inequity in America, reveals that, although the Great Recession was technically declared over in 2009 and reports are surfacing that the housing market is on the mend, if nothing is done to deal with the foreclosure crisis another $221 billion will be added to the $192.6 billion in already lost wealth for everyday people. Fortunately, with the correct policies in place, we could put $101.7 billion back in our pockets.
Highlights of the report include:
- In 2012 the foreclosure crisis continued to destroy wealth on a large scale with $192.6 billion in wealth lost due to foreclosures across the U.S.
- The most devastating impacts of the ongoing foreclosure crisis were in majority communities of color and racially diverse communities
- More than 13 million homes are still underwater and at risk of foreclosure and Americans stand to lose nearly $221 billion in additional wealth from these mortgages alone.
- A strategy of principal reduction would save money for homeowners, boost the economy to the tune of $101.7 billion, and create 1.5 million jobs
Big banks’ unscrupulous lending practices caused a mass loss of homeownership and wealth in communities across the country. Communities of color, who were specifically targeted with sub-prime and high-risk loans have fared the worst. The report shows how ZIP codes with majority people of color populations saw 16 foreclosures per thousand households with an average of $2,200 in lost wealth per household.
As Joetta Jones-Redmond of Oakland, CA shares in Wasted Wealth:
"I have owned my home with my husband for nearly 25 years. Throughout that time, I’ve always managed to make my mortgage payments — even in the roughest of times...We are badly underwater. I’ve applied for a loan modification with principal reduction to our bank at least 10 times. We’ve been denied over and over again... We didn’t cause this crisis, the banks did... It pains me every time I see another black family kicked out of our neighborhood by the banks. We don’t want to be one of those families."
Without proactive policy interventions, Americans stand to lose hundreds of billions more in wealth and the racial wealth gap will only continue to widen. Millions more homeowners will be foreclosed on, communities left desolated, and our country’s economic progress blocked.
“Wasted Wealth” documents how principal reduction--reducing mortgages to fair market value for underwater homeowners--is the fair policy our country needs. It’s impact could have far-reaching effects: from saving homeowners thousands of dollars a year, to creating 1.5 million jobs to being the needed boost our economy needs.
Spurred by the dire warnings in the report, Home Defenders from across the country are staging a Week of Action in Washington DC to call for President Obama and Attorney General Eric Holder to pursue policies like large-scale principal mortgage reduction and foreclosure reform.
The Campaign for a Fair Settlement has partnered with the Home Defenders League for the Justice to Justice Week of Action because dramatic actions like these represent our best hope of convincing President Obama to make significant changes to end the foreclosure crisis, many of which are possible without needing congressional approval, and prevent the additional leaching of wealth from the middle class predicted by the report.
You can find more information about the Week of Action, as well as find out how to best to get involved, by visiting the Justice to Justice Week of Action in DC campaign headquarters.
Here’s more on the top-line findings, excerpted from the original report, which is available HERE.
- The foreclosure crisis continued to destroy wealth on a large scale in 2012: Three years after the reported end of the Great Recession, the foreclosure crisis continued to destroy wealth on a large scale in 2012, with $192.6 billion in wealth lost due to foreclosures across the U.S., an average of $1,679 in lost wealth per household for each of the country’s 114.7 million households.
- The most devastating impacts of the ongoing foreclosure crisis were in majority communities of color and racially diverse communities: ZIP codes with majority people of color populations saw 16 foreclosures per thousand households with an average of $2,200 in lost wealth per household. In sharp contrast, segregated White communities experienced only 10 foreclosures per thousand households and an average wealth loss of $1,300 per household.
- More than 13 million homes are still underwater and at risk of foreclosure and more lost wealth: For reporting ZIP codes, there are at least 13.2 million underwater mortgages (when a homeowner owes more than the home is worth) on the books.1 The Congressional Budget Office estimates that 13% of underwater homeowners are already “seriously delinquent” on mortgage payments — they are foreclosures-in-waiting.2 If action is not taken to prevent these mortgages from going into foreclosure, Americans stand to lose nearly $221 billion in additional wealth from these mortgages alone.
- A strategy of principal reduction would save money for homeowners, boost the economy, and create jobs: Principal reduction — writing down underwater mortgages to current market values — would create significant savings for underwater homeowners. It would also generate new economic activity and create jobs in local economies. Using 2012 data, a principal reduction program could produce average annual savings of $7,710 per underwater homeowner nationwide, boost the U.S. economy to the tune of $101.7 billion, and create 1.5 million jobs.