It is a scene being repeated in cities and towns across America as loans that were made to borrowers with little or no credit history, many of whom could not even afford a down payment, fail in ever-growing numbers. It is also a story of how local economic trends are intersecting with national politics, with local foreclosures drawing the attention of Democratic presidential candidates, including John Edwards and Representative Dennis J. Kucinich of Ohio.
On the Republican side, President Bush announced on Friday several steps aimed at alleviating the impact of the subprime crisis on homeowners. In a Rose Garden appearance, he ruled out a federal bailout, citing both “excesses in the lending industry” and unduly optimistic homeowners who took out “loans larger than they could afford,” as reasons for the mortgage woes.
Indeed, what was once a problem confined mostly to economically struggling areas is quickly becoming a national phenomenon. Last year, there were 1.2 million foreclosure filings in the United States, up 42 percent from 2005, according to RealtyTrac, a firm that analyzes such data. At current rates so far this year, RealtyTrac expects foreclosure filings to hit two million in 2007, or roughly one per 62 American households ”” a rate approaching heights not seen since the Great Depression.
Analysts also say that the fallout from mortgages gone bad is spreading well beyond borrowers now in default. It has begun to engulf middle-class communities like Maple Heights, where nearly 10 percent of the houses ”” or 910 properties ”” have been seized by banks in the last two years. And it foreshadows what could lie in store if mortgage holders default on what the Federal Reserve conservatively estimates to be $100 billion in risky subprime loans. Many of these loans were made in 2005 and early 2006, when standards were at their most lax and cities like this were blanketed with aggressive pitches from mortgage providers.
“I don’t think we’ve hit bottom,” says Michael G. Ciaravino, the mayor of Maple Heights. “My fear is that foreclosure rates could go to double where they are today.”
What irony. While reading page 3, up pops an ad for a neg am loan. I wonder how much the NYT made from that ad in the article that described the havoc being by timebomb loans such as the one being advertised.