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Issue #1519      21 September 2011

Sharp rise in foreclosures in US

Notices of home foreclosures increased sharply in August, a marked 33 percent rise after slowing to a trickle over the last year. This was the sharpest rise in four years. The increase suggests that loan institutions may again be aggressively reclaiming defaulted properties in the wake of the “robo-signing” scandals where banks anxious to maximise profits forged signatures on foreclosure documents or allowed them to be signed without adequate scrutiny.

State attorneys general have filed suit against the big banks for such practices.

While labour, community groups and civil rights organisations called on banks like JP Morgan Chase, Bank of America and Wells Fargo to declare a moratorium on foreclosures, the delay was due to efforts to avoid legal entanglements.

The Obama administration has sought to address the mortgage crisis by providing struggling home owners with financial assistance and urging banks to renegotiate contracts. Such efforts, however, have had meagre results. Additionally, the Republican Party earlier in the year attempted to gut the administration’s mortgage assistance programs.

White House officials, however, have not given up and included in their new jobs bill a proposal that will provide employment repairing foreclosed homes: a measure in President Obama’s jobs bill could relieve some of the downward pressure on the housing market caused by the abundance of foreclosures. The measure, known as Project Rebuild, calls for US$15 billion to be set aside for refurbishing foreclosed and vacant properties, including residential buildings.

Over 800,000 homes are expected to be foreclosed upon by the year’s end.

The troubled Bank of America, which recently received a several billion dollar bailout from Warren Buffet, is leading the pack in seizing distressed homes in states where court action is not required. For example, in California, Bank of America ratcheted up the number of notices of default on homeowners by 182.4 percent from July to August.

Similarly JP Morgan Chase has resumed foreclosure action in 43 states.

The mortgage crisis began with defaults on sub-prime loans but as the recession deepened quickly spread to standard loans.

As a double-dip recession looms, nagging high unemployment is now the chief cause of home loan defaults.

People’s World  

Next article – Poland trade union raps EU ministers

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