Wednesday, July 8, 2009

This Crisis Is Far From Over - Foreclosures in America

As part of our larger collection on the issues of housing and homelessness we have pulled together a special collection on the topic of foreclosures.

In order to get some much-needed perspective on this subject we asked Lindley R. Higgins, Applied Research Manager at NeighborWorks America to give us his summary of the issue and why it's so important for all of us to read up on just how we got here and what might be coming next.

"The foreclosure crisis in the United States has not only caused banks to fail and investment portfolios to collapse, but it has also devastated families and communities. And the crisis is far from over.

The run-up in foreclosures began with subprime loans that were heavily concentrated in low-income, minority communities. Risky products were sold to unprepared borrowers in a housing market that seemed to know only increasing values. As long as prices continued upward, the weakness in underwriting and the overextension of credit were obscured. After the housing bubble burst, problems spread beyond subprime; now, the majority of foreclosures are on prime loans.

As of mid-2009, foreclosures continue to increase, housing prices are still declining, most loan modifications are leading only to re-defaults, and unemployment’s continuing rise threatens additional mortgage defaults. A second wave of foreclosures from Option ARMs—particularly risky mortgages that can take as long as five years before interest rates spike—will test the strength of the financial system. It will be years before the worst of the crisis is behind us.

IssueLab has assembled a collection of research that can inform responses to this crisis. The papers here range from descriptions of local effects to strategies for mitigating foreclosures’ impacts. Researchers and practitioners can read about how foreclosures have affected Atlanta or Chicago, or the relationship between foreclosures and homelessness, or foreclosures and crime. The papers here help in understanding the very important question of how we got into this mess in the first place, with varying perspectives presented.

The current crisis will one day recede into memory. But the lessons learned should remain with us for a long time to come. IssueLab is making this possible by assembling the latest research from the institutions most involved in solving this crisis and making it easily accessible to a public that has a real need to know. "

(Image provided under a CC license by Andrew Ciscel)

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