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Foreclosure wave sweeps America
Key Excerpts from Article on Website of BBC
Posted: November 18th, 2007
http://news.bbc.co.uk/2/hi/business/7070935.stm
A wave of foreclosures and evictions is about to sweep the United States in the wake of the sub-prime mortgage lending crisis. This could destabilise the US housing market and may also lead to further turmoil in financial institutions, who collectively own $1 trillion (480.6bn) worth of sub-prime debt. Cleveland, Ohio, is an industrial city on the banks of Lake Erie in the US "rust belt". It is the sub-prime capital of the United States. One in ten homes in the city is now vacant, and whole neighbourhoods have been blighted by foreclosed, vandalized and boarded-up homes. Cleveland is facing a rising crime wave, and the cost of demolishing the vacant houses alone will cost the city $100m of its tax base. According to Jim Rokakis, the County Treasurer for Cleveland's Cuyahoga County, "Wall Street strategies that made the cycle of no-money-down, no-questions-asked lending possible have sucked the life out of my city". As the credit crunch continues to bite "families all over the country continue to lose homes in record numbers, stripping families of their wealth and destroying entire neighbourhoods," says Michael Calhoun of the Center for Responsible Lending, which tracks these issues. There have already been 1.7 million foreclosure proceedings in the US in the first eight months of 2007, and up to 2 million families are expected to lose their homes over the next two years, according to estimates by the US Congress's Joint Economic Committee. Many of these mortgages were sold by unscrupulous and little regulated mortgage brokers, who received handsome commissions for selling expensive and unsuitable products. Some customers were not told that their interest rates would go up sharply after two years; others were promised they could refinance their home before higher rates took effect. Others found that when they had difficulties paying, huge unexplained fees were added to their bills, putting them further in debt.
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