Foreclosures and New Housing Policy

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Table of Contents

Problem Statement
Evidence of Problem and Suspected Causes
Goals of the Policy
Criteria for analyzing the Potential
Description of Next Steps
References

Problem Statement

Many foreclosures may result into harmful impacts in the neighborhoods they are located, especially when the foreclosed homes do not have individuals to maintain them and ensure that they remain secure. Most often, the ownership of the property title is passed back to servicers or the lenders. In cases where sound market conditions prevail for the neighborhood, lenders are entitled to strong incentives that shield them from protracted deterioration and vacancy. Selling out the homes in a hasty manner guarantees a profit, while the lender intends to maintain the good condition of the property while still on sale.

However, lenders do not wish to incur high maintenance and security costs when foreclosures are in neighborhoods with lower prices since there are no incentives. In fact, huge costs may be incurred in the legal procedures that create foreclosures since lenders are entitled to pay for certain services such as attorney’s fees and cater to property management.

When properties lose occupants and it becomes apparent that they are not taken care of, potential buyers and real estate representatives deem it as an indicator of distress to the neighborhood and a likely drop in property value. The effect of a certain level of under-maintenance may not be significant, but properties that are not secured are exposed to squatter invasion, vandalism or destruction of critical appliances and fixtures. Some may be turned into drug points, causing a disorder that paves the way for increased crime in the surrounding apartments and homes. As the vacancy period is prolonged with nobody maintaining the houses or paying for electricity, the physical structure of the building continues to deteriorate. This increases the chances of structural fire outbreaks.

In neighborhoods where housing demand is relatively high, people are much concerned about the presence of one or a few foreclosures. But in situations where there is a high number of foreclosures, it becomes harder to correct the problems. In addition, few foreclosures may accelerate the decline in property values in a neighborhood whose values are already declining.

Evidence of Problem and Suspected Causes

Communities Suffer From Increased Crime

Homes that have been abandoned as a result of crisis emanating from foreclosures are faced with the risk of a rise in crime in the communities. Thieves break into houses and disappear with valuable items such as water heaters, air conditioning units, refrigerators and even portable toilets. Destruction of property and vandalism makes it difficult to sell the homes. More money is spent fixing the homes than the amount that is expected after the sale of the house. Theft is not the sole crime in communities that have a high concentration of foreclosures. Studies conducted have indicated that an increase in the rates of foreclosures increases neighborhood violent crimes.

Vacant properties also attract other different forms of violent activities. For instance, cases have been reported where open, empty lots in some blocks are used by thieves to store and strip parts from stolen vehicles. The properties have also been used to dump bodies some of which are crime victims. Blocks with unsecured or vacant buildings are used to transact drug activities. Police get many drug calls from such buildings as compared to blocks without vacant buildings. Violent crime and vandalism lead to unhealthy environments for habitation by communities. Residents in some of the communities that are hard hit by foreclosures live in fear of drug deals, stray bullets and a myriad of other illegal activities in their neighborhoods that were once safe.

Financial Suffering to Communities

Individual homeowners are not the only people who incur financial losses when the foreclosure crisis occurs. Local governments and communities experience the spillover effects that lead to a drop in their annual budget. Lower property values occasioned by foreclosures cause a reduced tax base. Research that was conducted by the Center for Responsible lending indicates that foreclosures cause neighbors to lose $223 billion (Vidmar, 2008).

In addition, the center points out that millions of homes are bound to experience property devaluation due to foreclosures in their neighborhoods. Some cities struggle more than others. For instance, Vallejo which was a flourishing town in California had to be declared bankrupt when the collapsing housing market interfered with their weakened economy. The city slashed close to a hundred jobs and withdrew its funding for parks, a library, a center for senior citizens and other public services but this could not even hold off the spiraling bankruptcy.

It is unfortunate that as a result of foreclosures, public services and social programs are the first ones to be divorced from municipal budgets. This is a harmful cycle since the programs that are affected are the same problems that assist residents to recover from the effects of the foreclosure crisis (Vidmar, 2008).

The Vulnerability of Community Members to Scams

For over a decade, subprime lending has been playing a significant role in the rise of the country’s housing, allowing many people who would otherwise not have bought houses to do so. Most of the subprime loans are regarded as predatory because the homebuyers are initially deceived through hidden fees, ballooning interest rates, and penalties. The lenders reserve the right to repossess the properties when the buyers can no longer make the payments. The increase in the number of foreclosures has caused an increasingly predatory atmosphere since foreclosure rescue has been turned into a booming business for scammers (nsba, n.d).

Unscrupulous lenders make use of popular techniques with the intention of capitalizing on residents who struggle. Rescue companies pledge their promises that they can assist residents to escape foreclosures. The companies trick people to pay them upfront, severing their direct contact with the lenders, transacting paperless agreements and even signing papers that are not genuine to surrender the deed to the homes. The elderly, the poor, minorities and less erudite individuals are the most common victims of such scams but anybody runs the risk of becoming a victim.

Stress and Instability Among Youths

Some of the people that suffer a lot due to foreclosures are children. The Center for Responsible Lending estimates that more than 1.95 million youths suffer from the effects of foreclosures. It provides a negative environment for bringing up the youths. Children who are exposed to dangerous and unstable environments most likely to suffer from developmental problems. The children have a feeling that they are emotional and financial burdens to their parents.

As a result, most of them begin to sacrifice for their families. Some are forced to abandon music lessons or sports teams since their parents find it difficult to pay for them. Others look for weekend and after-school jobs to assist their parents in paying their bills. In most cases, family vacations are postponed because they prove to be unaffordable (Bardach, 2012).

Youths do not only sacrifice the comforts of a normal childhood, but they also endure other forms of effects. Moving renders the life of a child unstable. Children lose teachers, friends, social networks and most important of all, they never gain confidence. Lifestyle changes are difficult and a source of stress for most youths and leads to poor performance in school and low self-esteem. Behavioral issues are also common among kids who move because they have a feeling that they remain strangers in their new environments. The new neighborhoods may be characterized by worse school systems, more criminal activities and a limited number of activities for the youths.

Struggle to Find Shelter Among the Displaced

When thousands of people lose their homes, they resort to staying with their relatives and friends. Others move to emergency shelters while others start to live on the streets. Since the foreclosure crisis surfaced in 2007, cases of homelessness have been on the increase. Communities have been losing important local leaders and social capital after residents relocate to other places. Homeless individuals, when interviewed in order to establish the reasons behind their homelessness, cite foreclosure as the immediate cause of their situations. The number has been increasing since 2006.

The majority of individuals who own homes before being rendered homeless as a result of foreclosures rent new houses to stay in. The increase in the demand for rental properties causes the prices to increase. Victims of foreclosures find it difficult to pay and qualify for rental housing since their credit scores are usually damaged. In addition, most of the foreclosed properties throughout the country are usually multiunit structures. Landlords of the buildings experience difficulties in paying off the banks hence they end up losing the properties. As a result, families are forced out of the houses into the streets after a short notice. Bodies like the National Low-income Housing Coalition have recorded high numbers of families that have been thrown out of their rental houses (Stone, 2002).

Some of the displace families construct tents to serve as their homes and this causes the development of tent cities. The costly rent payments compel people to pitch tents or just live outside their cars in such tent cities. They usually live with no basic amenities such as electricity, drainage and plumbing. In addition, they lack places for preparing and storing food. Lack of refrigeration and plumbing services is a health risk since people are exposed to poor hygiene and unsanitary foods. People have been moving out for good in foreclosure epicenter cities such as Cleveland. The combined factors of property devaluation, job loss, and foreclosures have been driving people a way to start their lives afresh in other places.

Communities Are Blighted by Neglect

The abandonment of homes due to foreclosures causes the properties and the communities to begin deteriorating. Unmowed lawns, garbage, dilapidated roofs and pests are never attractive scenes to look at. Failure to take good care of the environment changes the entire atmosphere of a community. People who remain may often feel lonely, fearful and frustrated. To make matters worse, potential buyers are put off by such conditions hence making it difficult for the empty houses to find buyers.

Many neighborhoods that had made significant progress in urban renewal attempts have been faltering in their once lively efforts. Organizations and local governments had also invested money and time in neighborhoods at risk in order to change them into favorable living environments. The communities had also slowly returned but the foreclosure issue interfered with the revitalization efforts the communities had embarked on. The result is that the struggling neighborhoods find it difficult to hold on (Munger, 2000).

In addition to the community neglect physical aspects, abandoned homes also lead to safety and health issues. For instance, thousands of vacant homes in Florida have turned into mosquito breeding places. Thousands of mosquitoes are produced within a short duration of time in abandoned pools. The surging number of mosquitoes in the neighborhoods increases the chances of disease breakouts.

The other aspect related to neighborhood blight is the continually increasing number of pets that are left when foreclosure visits homes. Some families experiencing financial problems discover that they cannot maintain their pets or their new housing units cannot support the pets. This compels concerned individuals to form groups that take care of abandoned pets as a result of a foreclosure. The groups manage other foreclosed properties apart from pets (Menzel & Moonie, 2012).

Goals of the Policy

Since foreclosure is a serious issue that affects the communities, the policy will be aimed at achieving the following goals

Ensuring that there is no disproportionate impact among minorities
Looking for suitable places where displaced persons can be resettled.
Offering social amenities to improve the living conditions of displaced persons
Laying down mechanisms that will ensure that people do not purchase houses fraudulently.
Ensuring that individuals who qualify for prime loans are not given subprime loans
Increasing the potential of people to become homeowners by increasing their monetary incomes through different projects.

Criteria for analyzing the Potential

Analyzing the potential is an important aspect of policy development and the following steps will be followed.

Ascertaining whether the problem has been exhaustively identified
Conducting intensive research to identify the various perspectives of the problem
Considering potential solutions
Analyzing alternative methods of dealing with the foreclosure crisis

Description of Next Steps

Despite the fact that virtually all ethnic groups suffer from the effects of foreclosures and subprime lending, minority communities often are hard hit as compared to other groups. It is important to look for more information on the groups that are adversely affected by the foreclosure crisis. It is unfortunate that many poor and minority communities lack the same resources or options as richer people, such as access to prime lenders. It is also important to find out why minorities continue to suffer disproportionately.

While Hispanics and African Americans earn almost two-thirds as much as whites, it has been found out that typical nonwhite families’ wealth holdings are approximately a tenth of the typical white family. This information will be gathered through various means such as libraries and studying existing literature. Foreclosure is undoubtedly an issue of concern and a real problem in the U.S. It is clear that foreclosures lead to a multifaceted negative impact on communities and pose a big threat to efforts made by local organizations that have led to increased homeownership, reduced crime and converted communities into healthy living places. Foreclosures among communities have been highlighted as sources of significant problems among communities.

References

Bardach, E. (2012). A practical guide for policy analysis: the eightfold path to more effective problem solving. Washngton,D.C: CQ Press.

Menzel, N., & Moonie, S. (2012). Health Effects Associated with Foreclosure. Web.

Munger, M. (2000). Analyzing policy : choices, conflicts, and practices. New York: W.W. Norton.

nsba. (n.d). Policy Development Steps. Web.

Stone, D. (2002). Policy paradox : the art of political decision making. New York: Norton.

Vidmar, C. (2008). Seven Ways Foreclosures Impact Communities. Web.

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