Devastation Coming to Your Neighborhood? Mortgage Crisis in Perspective

The current mortgage crisis is not only destroying individual families, but whole neighborhoods too. And the neighborhoods that are being destroyed, at least in NYC, are the very neighborhoods that try so hard to "make it," but can't seem to catch a break for long.

That's the very important message in a terrific story in today's NY Times written by veteran reporter and Bronx native David Gonzalez.

Gonzalez spent "shoe leather" time in the Bronx, talking to local storeowners and residents in the Williamsbridge neighborhood (and others), and what he found was alarming: people can't afford to fix their houses or buy more furniture because every cent, in many cases, is going to pay off a bad mortgage. This story is important because it's one of the first stories I've seen that actually documents the "domino effect" that the mortgage crisis has already started to have in many neighborhoods.

The math for this is really quite simple: bad mortgages = financial crisis for families = less money spent in the neighborhood on things like furniture and home improvements = businesses and shops that have to close = neighborhoods that will soon look like they did in the "bad old days" of the early 80's.

Gonzalez also spent some time with a mortgage counselor at the North Bronx office of Neighborhood Housing Services of NYC. NHS, one of the largest non-profit housing groups in the City, is 25 years old and provides homeownership education, financial assistance and community leadership. It's a unique group because NHS is led by local residents and guided by local needs. And so, as you can imagine, NHS has been nearly overwhelmed by the number of people seeking assistance; some people are already in foreclosure, some are worried that soon they'll be unable to keep up with their payments, and others come in to try to avoid trouble altogether.

And if you think this scenario couldn't possibly happen to you or anyone you know, think again. Many of the families now caught up in the mortgage mess are solidly middle class. They have jobs as civil servants, police officers, school aides, nurses. Their only crime - pursuing the American dream and believing that those who offered them a piece of that dream, home ownership, were experts and were sincere.

Read it and weep.

Follow Linda Cronin-Gross on Twitter: www.twitter.com/lindacgross@twi

Comments

[fourex]

NBC, A housing report shows home sales plunged 36.2 percent last month in nine counties around San Francisco Bay, marking the biggest annual drop for November in the past 20 years.

[starrianna]

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NEWS FLASH:
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In Southern California, in places like Orange County and San Diego, there are hundreds and hundreds of $1,000,000+ homes going into foreclosure EVERY MONTH.

Each one of these houses represents an average of a $200,000 LOSS to the lender.

Add it up and it almost looks as bad as Iraq.

[bertisbert]

Since day one, we have been told that home ownership is THE American Dream. It's that simple. Go into debt for the rest of your life, and you will be all set. That is what it means for most of us. Unfortunately, we can not afford to own our homes outright for many, many years, if ever. During the Greenspan era, cheap debt and over-inflated, seemingly bulletproof housing prices solidified this in the minds of many. Unfortunately, basing our entire economy on cheap debt and over-inflated home prices, rife with speculators and fraud, was an Enron-type scam of the gravest nature. Fortunately, the Fed can continue to print money and tax the children and grandchildren of the unlucky many that are now realizing that this "dream" was really only a dream for the lenders that have taken the money and run. These bubbles are not a mistake or simple anamolies. They are a built-in, predictable symptom of our financial system and only serve to benefit those that never have to borrow money and can therefore lend it. And to think that our own Federal government long ago became a victim of this insatiable greed and endless cycle of debt is the most maddening fact of all. I wonder how many people out there are sick enough (and knowledgeable enough) to want to do something to change the system??

[Sundialsvc4]

It's not just "bad mortgages" ... it's "usury."

And it's not just in the depths of New York slums.

[MilwaukeeDan]

I don't understand how the "value" of these homes skyrocketed. Was it supply and demand or are there other factors involved? There are always other factors. Let me give you an example, and you educate me. Back in 1978, my parents purchased a large 12 year old home on a 1/2 acre lot in the burbs for $65k, their income at the time was $25k+ot(3 to 1 ratio). My parents took out a small ($15k) mortgage that they paid off in 5 years and they even renovated the house during that time. Flash to 2007, my father retires earning $50k, but his house is worth $300k(6 to 1 ratio). Some would say great investment, but to purchase a smaller house, they still need $250k. Enter buyers for the property, the young couple are making $75K combined, they have $50k to put down and need to finance $250k. Who really makes out on this deal? The "financial institutions". In my mind, this property should only be worth $150K max(going back to my 3 to 1 ratio). The government and the financial institutions have made it so that any breathing idiot can get a loan from a scumbag banker looking to screw them. And while the "values" and demand for these properties where going up, the bankers didn't worry, they could resell if the buyer f**ked up. Now the values are going down and there is a lot of inventory, so everyone is looking for a bailout. The problem with this country is that we live on debt and the institutions are making billions off our backs, we are slaves to consumerism. There are thousands of apartments in this area that are available due to everyone thinking they can afford a home, well, it's time to move back to those apartments.

[mmckinl]

There needs to be Bankruptcy Reform ...Again !

People who bought second homes, RVs or yatchs can get reductions in bankruptcy court, but not homeowners ?

Buy a yatch , get a break. Buy a Home, get screwed! The American Dream for millionaires, bankruptcy nightmare for home owners.

Barney Frank has a bill to help with this but the powers that be want to drain evvery last drop of blood from those least able to afford it .

Socialism for the rich, capitalism for the rest.

[kasa5400]

Here is some actual text from the story:

"A little more than a year since she bought her Bronx home for $535,000 with no cash down, she is facing foreclosure. Even if she could scrape together the $7,500 to catch up on her overdue mortgage payments, other calamities await: an interest rate that will rise in coming months and a huge balloon payment hovering in the distance like a financial Hindenburg.

“I’m not doing anything to fix up the house,” said Marcia, a nursing home aide "


OPERATIVE PHRASES AND DEFINITIONS:

"Nursing home aide" = maybe $10 an hour or $20,800 a year. Even at $20 an hour (unheard of for nursing home aides) that is $40,160 a year.

"house $535,000 price with no cash down" = at prime interst rate of 6%+/- and 30 year mortgage means payments of $3,207 a month or $38,484 a year (not including taxes and insurance.)

That house price, at minimum, requires a $140,000 income.

She had to have done an option-ARM with minimum payments that do not even cover all the interest let alone any principal.

The woman whines "“I just... hope they don’t take my home. "

(1) It was NEVER "hers." She was renting from the bank.

(2) On her income, it would NEVER be 'hers."

I can't decide who was stupider -

Her for thinking she could begin to PAY for it EVER on her income from the job she does . Not exactly the brightest bulb on the tree. If she makes $30-40K, and every penny of her income went to paying just the principal amount of $535,000, it would take 15+ years. (And no interest would be paid and no food and no nothing.)

OR

The idiot lender who gave her the loan.

Love to see what she and the mortgage broker put down as her income. Somebody was lying.

And the columnist wants us to feel sorry for someone who went out and 'bought' that house at that price on her income????

[January]

I am not "in the know." But I hear that the evidence for the downturn could be seen in June of 2006.

So realtors sell and lenders lend on half a million dollar properties for no money down? I do not doubt that they realized they were actually renting the property under the guise of home ownership, so that the *owner* would bear the burden of developing risks.

I'm not one for chanting revolution. But if such realtors and lenders are bailed out, it is time to get the pitchforks and scythes and cut down some weeds.

[Republicnotademocracy]

Foolish people do not necessarily deserve home ownership.

[Mormondude]

I don't feel much sympathy for these gullible people. Heck, I think 95% of people that carry a balance on a credit card are getting robbed blind. But I don't blame the credit card company for that. And I don't think we need to bail out every person with credit card debt.

If the federal govenment can work out a plan to help these families without rewarding irresponsibility and gullibility, I'd support it wholeheartedly. If they want the banks carrying these bad mortgages to share in that solution, fine. But ultimately this was a lender/borrower decision and they alone should bear the brunt of the consequences for it. Responsible lenders and borrowers shouldn't get stuck with the bill.