The national surge in mortgage defaults is claiming more victims than just the thousands of subprime borrowers facing the prospect of losing their homes.
Social service agencies say homeless rates are on the rise not only as families lose their own homes to foreclosure but also as renters are evicted after their landlords default. Financial analysts warn that state and local governments will soon feel the pinch of sharply reduced property tax revenue. And counselors say divorces and reports of abuse are rising as families burdened by impending foreclosure take their stress out on one another.
The ripple effect illustrates the wide-ranging impact the subprime mortgage crash has had not only on the U.S. economy but on society at large, said Robert Reich, who was labor secretary during the Clinton administration.
“Understand that houses are the most important assets most Americans have, and they are seeing those assets disappear,” Reich said.
Little recourse for renters
Especially hard hit are families that rent their homes from landlords facing foreclosure. RealtyTrac, a national real estate network that specializes in foreclosed properties, estimates that more than 20 percent of foreclosures involve investment properties; when landlords lose those properties, their tenants lose a roof over their heads with little warning.
Mona Hoeft, a rental assistance technician with the Olmsted County Housing and Redevelopment Authority in Rochester, Minn., said her agency was being swamped with calls for help from families who were being tossed out on the street.
“Unfortunately, there’s not much a tenant can do other than move,” Hoeft said. “There really is no protection for the tenant.”
Congress is considering a measure to require landlords to give tenants 90 days’ notice before they can be evicted. But even if it passes, it will not be in time to help thousands of renters like Sharron Shagonaby, 67, who was never late on the $900-a-month rent she paid on a house in Holland, Mich. She was forced out two weeks ago when her landlord defaulted on his loan.
“I just can’t see how people are so cold that they would actually put me out on the street when I didn’t buy the house,” said Shagonaby, who uses an oxygen tank and is debilitated by diabetes.
“I didn’t forfeit my payment," said Shagonaby, but she fears that she will have trouble finding a new place to live.
“People that you apply to for a house won’t believe that,” she said. “They won’t even look at if you were really evicted — [they think] you’re just making up some story.”
Shelters feel the stress
Darryl Bartlett, executive director of the Holland Rescue Mission for Women, called Shagonaby an example of “a new kind of homeless — those that are the innocent victims.”
“We did not plan for large numbers of people who are being foreclosed on becoming homeless,” Bartlett said. “That was not in our plan.”
Eugene and Kathleen Pobol were packing up their rental home this week in Bakersfield, Calif., after getting an eviction notice.
“We’re between a rock and a hard place, and basically we’re up the creek without a paddle,” Eugene Pobol said.
“Here we are, tenants, paid our rent on time, went through credit checks and everything else, and now, all of a sudden, the landlord’s going bad on a mortgage,” he said.
Officials at the Bakersfield homeless shelter said they were at capacity but that more families wanted in. The shelter took in seven families in one day this week, said Louis Gill, the shelter’s executive director.
“I’m definitely concerned now that we’re receiving phone calls from people going through foreclosure,” Gill said. “We’ll have to see what kind of additional burden that puts on the emergency systems.”
Local governments under the hammer
Government agencies that can help stricken families are also facing a bind, economists said, because the high number of foreclosures removes property tax payers from the rolls.
“The housing market has put a big negative for local government revenues across the board,” said Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto.
The nonprofit Center for Responsible Lending said California could lose nearly $3 billion in property tax revenue and another $1 billion in sales and transfer tax revenue thanks to foreclosures.
“Property tax revenues are going to be a lot less than local governments built into their budgets, and there are going to be tough times at the local level,” Levy said.
Atlanta City Council member Mary Norwood said property tax revenues would also take a hit because foreclosed homes drive down property values in a neighborhood, leading to lower assessments on people who do pay up. The Center for Responsible Lending put that price tag at more than $17 billion nationwide.
“You have a lot of vandalism, the house deteriorates, that drags down the neighborhood,” Norwood said. “It affects the property values of the other homeowners in the community.”
Families under siege
The stress of dealing with threatened foreclosure is also taking a serious toll on families.
“It just gets pulled right out from underneath you,“ said Wendy Hatt, whose marriage broke up under the strain of dealing with the prospect of losing the family’s home in Tucson, Ariz.
Hatt’s real estate agent, Amado Calderon, said homeowners squeezed by the mortgage crisis were left at sea.
“It’s one of the most stressful situations for couples, for homeowners,” Calderon said. “They really don’t know their options.”
At the Women’s Center of San Joaquin County in Stockton, Calif., calls to the domestic abuse hot line have jumped 12 percent in recent weeks, fueled largely by the strain on families losing their homes, said Joelle Gomez, the center’s director.
“If they’re not dealing with the stress or talking to somebody about it, it is going to escalate and come out in forms of violence,” Gomez said.
Vivian Ward, a hot line counselor at the center, said families simply run out of money even as they watch their mortgage rates climb.
“A lot of times the abuse starts because they don’t have enough money to make those mortgage payments,” she said. “They’re so high.”
Brooke Hart of NBC News and NBC affiliates KCRA of Sacramento, Calif.; KGET of Bakersfield, Calif.; KNTV of San Jose, Calif.; KTTC of Minneapolis; KVOA of Tucson, Ariz.; WEEK of Peoria, Ill.; WGBA of Green Bay, Wis.; WOOD of Grand Rapids, Mich.; and WXIA of Atlanta contributed to this report.