Introduction-Foreclosure Crisis in the United States: Families and Communities at Risk

By Aguirre, Adalberto, Jr.; Reese, Ellen | Social Justice, Fall 2014 | Go to article overview

Introduction-Foreclosure Crisis in the United States: Families and Communities at Risk


Aguirre, Adalberto, Jr., Reese, Ellen, Social Justice


The real estate foreclosure crisis that began in 2006 was a global crisis involving multinational financial institutions that devastated families and communities across the globe. Yet, the United States was clearly the epicenter of this crisis. The foreclosure crisis was a principal factor in the reduction of the home ownership rate in the United States from 69 percent in 2006 to 63 percent in 2013. Major banking interests employed questionable and fraudulent lending practices that introduced new words, such as "subprime lending" and "predatory practices," into the public discourse. The American public, especially the American homeowner, realized that the worm that turned the apple brown was birthed by US banking interests. The resultant real estate "bubble" that burst exposed the inability of governmental regulations to keep abreast of changes in lending practices taking place in US banks and other financial institutions. More important, it also exposed the collateral damage caused by the foreclosure crisis--homeowners joining the ranks of the homeless, increased crime in neighborhoods with a large number of foreclosed properties, increasing numbers of children and families falling into poverty, and increased demand on public and social services. The American Dream of owning a home as a means of shoring up security for one's children and for one's old age was shattered for American families by the home foreclosure crisis. While the foreclosure crisis destroyed the quality of life enjoyed by many homeowners, the banking industry created new niches for profiting from the crisis. For example, private investment funds became an important tool for purchasing foreclosed homes and transforming them into rental properties (Reckard 2014). JPMorgan increased its investment in multifamily lending to accommodate the increasing numbers of homeowners that became renters due to the foreclosure crisis (Berry 2014).

Approximately four million American homeowners experienced foreclosure between 2007 and 2012 (Schwartz and Dewan 2012). In 2010 alone, when foreclosures were at their national peak, nearly 2.9 million properties, or about one in 45 housing units, were in foreclosure in the United States (RealtyTrac Staff 2011). By September 2012 .foreclosure filings in the United States had declined to 180,427, the lowest figure reported since July 2007. Analysts attribute this decline in part to economic improvements and to the impact of recent court rulings and legislation regulating the lending practices and the foreclosure process in various states. The decline in foreclosures has been uneven, however, with some states reporting rising levels of foreclosures in 2012 (Schmit 2012). As of 2013, the national foreclosure rate was still more than double what is was before home values began to decline in 2007, while more than one out of seven homeowners had an "underwater mortgage" that was worth more than the value of the home (Dewan 2013).

This special issue focuses on the various ways in which the real estate foreclosure crisis affected families and communities in the United States. The real estate foreclosure crisis was created by the contradictions inherent in global financial capitalism. Yet the very financial capitalists who caused this crisis found ways to profit from its aftermath and government bailouts. Meanwhile, families and communities suffered from the impacts of this crisis. Families lost their homes and savings. Displaced families left their neighborhoods and doubled up with other family members or friends. Children transferred from their schools, disrupting their friendships and their education. The home foreclosure crisis transformed entire neighborhoods and communities into empty wastelands. Abandoned homes left neighborhood stores struggling to find customers. Yards filled with overgrown weeds, mosquitoes infested abandoned swimming pools, and drug addicts found shelter in vacant properties. Neighborhood property values plummeted and shortfalls in property tax collections created growing deficits for local governments and school districts. …

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