Foreclosure
USA
By Joel S. Hirschhorn
24 October, 2007
Countercurrents.org
We
the people once owned our democracy. We elected “representatives”
to run it for US. Have you noticed? Somewhere along the way we lost
our democracy.
It was foreclosed by wealthy
and power elites that corrupted our “representatives” who
literally sold us out. Our homeland was foreclosed right in plain sight.
Sure, we citizens still reside in the USA, but we no longer own our
democracy. We pay rent through our taxes. But we no longer have any
equity. Our democracy is owned by the rich, and their partner foreign
elites and governments, which is why in a strict sense it no longer
is a democracy, but rather a plutocracy.
Modern day aristocrats –
an apt terms considering the many political dynasties in our ruling
class - maintain the charade that America is still a democracy by letting
us vote. They also give us many freedoms to distract us from our dire
political conditions. They’re smart, so they limit our choices
to the main parties that constitute the two-party duopoly. Even smarter,
they convert consumer spending (that they spur) into economic inequality,
making them, the rich, even richer and everyone else, all of us, poorer.
Donald Trump says we hardly
have any middle class left. He ought to know. Lou Dobbs says there is
a war on the middle class. He does not say what would only depress his
audience, even more. We the people have already lost the war. We have
a large Upper Class, for whom prosperity is real, and an expanding Lower
Class, for whom economic slavery based on compulsive borrowing, debt
and spending is all too real.
How We Lost Democracy Ownership
People born into American
citizenship or sworn into it have inherited a democracy debt –
a kind of political mortgage – that requires payment, not in dollars,
but in engaged and responsible citizenship, ensuring that those elected
to manage the government do so in the public interest. People like Thomas
Jefferson told us about the burden placed on Americans. But paying our
democracy mortgage has declined over the past fifty years.
I postulate that the decline
started after World War II with the advent of urban sprawl, speeding
up with accelerating suburban sprawl. Now, political divisiveness coexists
with sprawl on steroids, with gated non-communities of McMansions for
the Upper Class. As to the politics of sprawl, Americans traded democracy
ownership for home ownership. They stopped paying for democracy through
engaged citizenship and started paying for compulsive consumption. True
citizenship was replaced by social isolation and loss of social capital
as people cocooned themselves in their private space where they could
gratify themselves with more and bigger possessions.
With sprawl and all the enabling
automobile addiction, roads and chain stores, the power elites knew
exactly what they were doing. They made Americans time poor and too
tired to be politically active. Through distraction based on borrowing
and spending they suckered Americans into defaulting on their democracy
debt. Democracy was foreclosed, without any notice letter being sent
to us. Ownership was transferred to the rich and powerful elites sitting
atop the corporate state and, not coincidentally, making tons of money
from land development and home building. Wal-Mart was elected corporate
wage-killer-in-chief.
Delusional Ownership
Which brings us to our current
new twist on Foreclosure USA. Millions of Americans have experienced,
or will soon experience, foreclosure on what once was hyped as the cornerstone
of the ownership society – they are losing their homes. The bursting
of the housing bubble is often talked about in terms of slower home
sales and lower prices. The latest data: In September, the number of
existing single-family homes sold dropped 14.2 percent, compared to
September 2005, and the median price dropped by $5,000.
But something much worse
is happening and accelerating in virtually every community in all the
states. In a delusional democracy with delusional prosperity we now
are witnessing the proof that the ownership society is also delusional.
Apparently no one has told George W. Bush.
Up to 4 percent of America's
mortgaged homeowners might lose their homes to foreclosure in coming
months, one of the nation's largest lenders predicted recently, as those
homeowners find themselves trapped by heavy debt and the housing slump.
That's four times worse than the historical average of 1 in 100 mortgaged
homeowners who fail to keep up payments. First American Loan Performance,
a mortgage-data company based in San Francisco, says overall the national
foreclosure rate has climbed 27% from a year ago with an estimated $110
billion worth of homes expected to go into foreclosure. Rick Sharga,
a vice-president at RealtyTrac, said recently "Over a trillion
dollars is going to readjust in the next 15 months. We had almost 850,000
foreclosures last year and we are at 913,000 through September."
He predicted that national foreclosures could hit 1.2 million to 1.3
million by the end of this year. Guess George W. Bush has not heard
about this, only about great economic growth.
You probably have heard about
the incredible amount of sprawl housing growth around Las Vegas. But
not this: The number of foreclosures in Nevada has more than tripled
in the past year and jumped 83 percent since May. Nevada recorded 2,016
foreclosures in August. That was 83 percent more than in May and 255
percent more than in August 2005. Foreclosures are rising at a faster
rate in Nevada than the rest of the country, where they are up 24 percent
since May. In California, foreclosures increased 43 percent since May.
And what about the ever-sprawling
Sunshine State? Florida has one new foreclosure filing for every 254
households, more than four times the national average. Foreclosure activity
in the third quarter of 2006 rose by 14 percent compared to the second
quarter of the year. It was 39 percent higher than the same period last
year.
How about the Northeast?
In Massachusetts, 1,812 new foreclosures were initiated in August, which
is 72 percent more foreclosures than August of last year, and 266 percent
more than in August 2004. The July to August increase was 34 percent,
making it the largest month-to-month increase in the past three years.
When comparing foreclosures during the year ending Aug. 31 (15,309),
to the previous year (10,517), foreclosures increased statewide by nearly
46 percent.
Nationally, in August, 115,292 new properties were listed on the database
of online foreclosure tracker RealtyTrac, a 24 percent increase over
the level in July. More significantly, RealtyTrac currently lists 650,000
properties nationwide in foreclosure or pre-foreclosure, up from 75,600
just one year earlier, when the Gulf Coast was devastated by Hurricane
Katrina. The volume of bank seizures is immense. Foreclosure.com, another
online tracker of distressed properties, currently lists more than 1.27
million properties in some stage of foreclosure, bankruptcy, or bank
auction. Approximately 5,000 properties are added to the listings each
day.
Getting behind in mortgage
payments is one thing, called default. It's estimated that nearly 20
percent of homeowners in default earlier in the year lost their homes
to foreclosure in the third quarter. That's a more than a three-fold
increase over last year, when the default-to-foreclosure rate was only
6%. Meaning: People are having a harder time coming up with cash to
cover mortgage debt. Guess Bush has not heard about this.
Are things going to get worse?
You better believe it. Industry forecasters recently estimated that
more than $200 billion worth of adjustable rate mortgages will "reset"
at higher rates in 2006 and more than $1 trillion will reset in 2007.
This situation, compounded by the expected slowing of the economy and
the down housing market, which includes a growing inventory of unsold
homes, will almost certainly push more homeowners into the foreclosure
process.
Despite a lot of talk about
the mortgage issue and warnings, Americans are still diving in. Are
they falling for the economic hype coming out of the White House? Incredibly,
39 percent of new mortgages in the first half of this year were non-traditional,
high risk mortgages compared to an average 2 percent over the last decade.
Consumer debt burden is ballooning.
Statistics from the Bureau of Economic Analysis show that the personal
savings rate has been running in the red for 16 months. Additionally,
the Federal Reserve recently found that consumer debt has outpaced,
by 18.7 percent, the amount of income left after the payment of bills
each month, meaning that for millions of families the cost of living
is substantially higher than their monthly incomes can accommodate.
Guess Bush has not heard about this.
An enormous portion of the
total personal debt is mortgage debt. Since 2000, mortgage debt in America
has doubled, approaching $9 trillion. This year, $400 billion of this
debt is coming due in the form of mortgage readjustments. Research firm
LoanPerformance forecasts another $1 trillion in mortgage debt will
come due next year as the rates on millions more loans reset, sending
individual monthly mortgage payments hundreds of dollars higher, or
even worse.
In one, not unusual, case
in the Washington, D.C. area, a family started with a “teaser
rate,” just $1,700 a month. They thought it was fixed, but it
wasn't. Rising interest rates and deferred interest have now ballooned
that payment to $3,700 a month. They can't pay it, and they're not alone.
They will lose their home. Credit counselors say they're getting 10
times the concerned calls they used to.
Greedy Elites Conned Us
How has this come about?
Clever elites running and ruing our country discovered all kinds of
ingenious ways to sell mortgages to Americans still believing in the
American dream. They had help from the Federal Reserve. So called unconventional
or exotic mortgages were crafted to lure people in and make billions
of dollars for the financial sector. The whole trick was to get home
buyers to pay as little as possible initially. No cash down, no payments
toward the principal and low adjustable interest rates were the main
ways to pump up the housing market (the bubble) and, therefore, the
whole economy. Yet another gambit was to give mortgages to people that
really could not afford them, making them pay higher interest. These
"sub-prime" mortgages create a debt to income ratio that is
out of whack, which means mortgage payments that take too big a chunk
of income. When interest rates rise and other costs of living creep
up, people quickly sink and drown in debt.
The maximum percentage for
household debt which would include a mortgage, credit cards and car
payments is supposed to be around 36%. But now many homeowners find
themselves paying most of their income – more than 50 percent
– to their mortgage, especially after those monthly payments increase
sharply. And they are going up because of rising interest rates, which
is happening as wages are at best stagnant and other costs of living
are rising. Once, homeowners in a hot housing market could refinance
and take money out. In fact, from 2001 to 2005, they took out $500 billion
in cash from their home ATMs. This propped up consumer spending as wage
incomes stagnated, keeping the economy looking good. Now, with home
values declining, they can find themselves forced to pay a lot more
or lose their home.
Look at the larger picture.
In 1980 household debt, including mortgages, car loans and other borrowing,
was $1.4 trillion. Guess what it was in 2005? It had skyrocketed some
745 percent to $11.8 trillion. In 1980 credit card debt totaled $69
billion. Guess what it was in 2005? It had mushroomed to an amazing
$1.8 trillion - a 2,500 percent increase! In 1980 credit card debt was
just 5 percent of household debt; by 2005 it had jumped to 15 percent.
This has happened when people also got suckered into risky mortgages.
Maintaining consumer spending
has been the chief economic goal of the plutocracy. And to keep it growing
it required Americans to be convinced that they should borrow more and
go into greater debt. What kind of political leaders would want to do
this to their citizens? The worst kind: Democraps and Republicrooks.
Corrupt politicians care more about making corporations profitable and
the rich richer. Economic inequality is like a cancer. They are willing
to destroy the middle class on behalf of elites and the Upper Class.
Last Episode
What is the next installment
in Foreclosure USA? Our enormous national debt owned in large measure
by foreign interests can foreclose whenever they wish. Just as we the
people lost our sovereign control of our nation, so too will our corrupt
government lose sovereign control. With globalization, so heralded and
hyped by New York Times elitist and plutocrat Tom Friedman, moving forward,
American sovereignty will surely be foreclosed. Thus ending the Foreclosure
USA saga.
What can we do to stop Foreclosure
USA? Will electing Democraps do it? I doubt it. We the people must take
back our ownership of our democracy. With too little political choice,
our votes will not do the job. Our money is more powerful. We must politicize
consumer spending. We must have some radical, dissent-driven leadership
from true progressives to send signals to the tens of millions of disgruntled
Americans to cut their discretionary spending to achieve specific` political
reforms.
Money and greed have ruined
our country. Money and citizen re-engagement can save it.
Joel S. Hirschhorn
is author of Delusional Democracy Visit his website http://www.delusionaldemocracy.com/
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