In today’s America, the government and the lenders are completely disconnected from the very real troubles that homeowners are experiencing. The massive foreclosure mess that has crippled our economy has huge social repercussions that all the Band-Aid lending programs in the world are not able to prepare.
We are in crisis and those who lead us are failing to see the connection between the loss of homes and the forces crushing the resilience of the American spirit.
In the most recent report released by the U.S. Census Bureau, joblessness has pushed another 2.6 million people into poverty last year, with 15.1 percent of Americans counted as poor -- the highest rate since 1993.
Approximately 46.2 million people in the United States live in poverty. For a family of four with two children, that means making less than $22,113 a year. What I see when I look at those numbers are literally millions of families that have lost, or are very close to losing their homes.
This foreclosure crisis has not been caused by people looking for ways to shirk their obligations. Most Americans who signed their mortgage papers understood that a promissory note symbolized their responsibility to repay a debt. But an economic tailspin, declining home values, and shrinking job market have made it too difficult--if not outright impossible--for them to keep their end of what was often an unreasonable expectation in the first place.
These regular Americans are in the most distressing situation you can imagine. They have gone through their retirement plans, their savings accounts, and their checking accounts are drained. They have liquidated vehicles or other assets and racked up credit card debt. They have done all these things in a desperate effort to hold on to their homes.
When people are wiped out financially and lose their home; they lose much more. They have lost their dignity. People who have worked their entire life to build up good credit are losing everything. Without jobs, homes, reputations, the stress on these good people and their families often becomes unbearable.
Sociologists tell us that families should be viewed as interdependent within the larger society. In other words, the way the members of a family act at any given point in time does not occur in isolation from external events occurring in society. As the loss of family homes mounts, family units break apart, child abuse increases, and divorce rates go up. The legacy of this social stress is handed down for generations.
A recent study, led by Marilyn Essex, professor in the Department of Psychiatry and director of the Life Stress & Human Development Lab of the University of Wisconsin, Madison, scientists gave questionnaires to hundreds of parents of young children, who were part of a years-long study. Questions were asked about depression, financial stress (“how much trouble do you have paying monthly bills?”), marital stress (“are you concerned about how much you argue and fight?”), parenting stress (“do you often feel angry with your child?”), and feeling overwhelmed (“do you feel pulled apart by all your obligations?”).
When the kids were 15, the scientists analyzed their DNA, using cells obtained by cheek swabs. What they found was shocking: there were hundreds of differences in the DNA of kids whose parents were in the top 20 percent of stress. In short, parental stress passed along to the children in a family literally changes a child’s brain wiring.
Stresses inside the home aren’t the only symptom of the widespread crisis. We are losing entire neighborhoods, destroying an important part of the social fabric of our lives.
A widely cited article, titled “Broken Windows” which appeared in the March 1982 issue of The Atlantic Monthly spawned a theory that, in urban areas, repairing real estate problems like broken windows or trash on the sidewalks while they are small keeps crime and vandalism from escalating in neighborhoods.
The excess of foreclosed homes in our country serves as a daily reminder of this theory’s depressing outcomes. As families are forced to abandon homes, vandals, squatters or undesirable renters move in, undermining family neighborhoods and tanking the values of the surrounding properties. More empty buildings mean less property tax revenues for cities and towns. And less revenue means fewer services, further accelerating the spiral of disrepair and destruction.
Yet as our families and our children fall into jeopardy and our neighborhoods decay, those who can do something about this crisis seek to lay blame, to deflect criticism, and to continue to profit off the misfortunes of those they claim they serve.
We must demand that our civic and business leaders recognize the direct correlation between the fading of the American Dream and the housing crisis, and that they acknowledge the emotional component that is as surely damaging as the fiscal one.
In the face of the urgency of this situation, what should we demand that leaders and lenders consider to resolve some of these issues and lift the spirits of hardworking Americans who are watching their hard-earned dreams slip away?
• Allow homeowners to remain in their foreclosed house as a renter. Set rents at a reasonable rate, below the mortgage payment that was drowning the family. Give them a period of time--18 months or two years--to rebuild credit while they maintain the property with the pride of the rightful owner. Their children will feel secure, the community remains intact, the property is well cared for, morale is restored.
To me, this looks like a win-win solution. Once the homeowner has restored credit, then perhaps the lenders could consider allowing them to buy back the home at the value at that time.
• Put a moratorium on counting mortgage payments in credit scores. Freeze credit scores so people can have a sense of self-worth in the future and ability to buy. Anywhere from 12 to 24 months is enough time to come back when people are able stay current on consumer debt, or car loans.
• Create a credit amnesty program: for a certain period of time, people who lost their primary residence--not rental or investment properties--could be given some kind of amnesty or reasonable consideration for future loans. Many of these people have children who are going to go to college and they are being hurt by repeated pulls of credit scores and bankruptcy filings. There’s a negative cumulative effect as weaker credit ratings can begin to harm job prospects, applications for rental housing, etc.
These, suggestions, however, are just suggestions. In all cases, a broad application of simple, humane principles will suffice, and in that spirit, I offer the following prescription to our governments and bankers: Acknowledge our humanity. Allow people the option to remain in their homes. Give people a chance to be responsible. Work it out.
Bob Massi is an attorney and Fox News Legal Analyst. Watch him discuss the foreclosure crisis on "Fox & Friends" on Thursday, September 15.