In 2006 1.2 million foreclosures were reported, an increase of 42 percent over 2005. It is estimated that over the next two years there will be 2.2 million foreclosures, costing homeowners $164 billion.
How is this devastation to be explained? The corporate controlled media would have us believe that the crisis is only the fault of unscrupulous real estate brokers bilking Americans with bad credit. The media also employ the old "blame the victim" tactic, citing the "greed" of the consumer as a factor.
Nothing could be further from the truth. The mortgage crisis is the result of the "Subprime mortgage" scam concocted by giant financial corporations.
Subprime mortgages were created by profit hungry banking and mortgage industries to suck up the earnings of working class Americans chasing the illusion of the "American Dream."
For example, in 2006 60 percent of all foreclosures were in the so-called "Subprime Mortgage Market." It comprised only a quarter (25 percent) of the total mortgage market.
What is a "Subprime" mortgage? Taking advantage of historically low interest rates, large investment banks and mortgage lenders created "Subprime loans," which were nothing more than a set of predatory lending practices and loan sharking tactics designed to entrap millions of Americans into billions of dollars of suffocating debt.
Interest rates were kept artificially low for the first 2 to 5 years of a mortgage. After this period, the loan's interest rate is "reset" to levels substantially higher than the federal prime rate.
By these means, the financial corporations expanded the mortgage market by hundreds of billions of dollars in a little over a decade. Total Subprime mortgages grew from $65 billion in 1995 to $1.2 trillion in 2006, or from under 8 percent to about 23 percent of the total mortgage market.
As astonishing as these figures are, they do not capture the depth of the human suffering being generated by this crisis. We have all seen heart-wrenching stories of people who have lost their homes due to the loss of a job or illness. Now, to these numbers must be added millions of Americans victimized by the Subprime scam.
The next two years will see a dramatic rise in the number of foreclosures. This is because Subprime mortgages payments will rise 30 to 80 percent or more as loans are "reset" above current interest rates. For many of the working poor, monthly mortgage payments will exceed monthly take home pay.
It is apparent that the Subprime mortgage "crisis" is but one more symptom of a failing economic system that is impoverishing ever wider sections of the working class. An immediate result of the crisis will be a substantial rise in the number of homeless. The ranks of the destitute will be swelled enormously by the homeless with jobs.
What must be done to bring an end to this destruction of hopes and dreams of a better life? The answer is clear; the workers must join in the growing movement to take over the giant corporations and put them under the control of the people. Only in this way can homelessness be eliminated through providing suitable housing for all based solely on need.
