In the News: More Housing Meltdown and Lending Crisis Fall-Out

The continuing saga of the housing meltdown and the mortgage and lending crisis captures headlines throughout the nation, with a variety of news stories highlighting its progression through all sectors of the economy. Many expert economists have stated that the likelihood of a recession has increased, with murmurs and whispers of the potential of something worse, an actual depression, starting to be heard more frequently.

On December 6, 2007, Bloomberg.com reported that "the number of Americans who fell behind on their mortgage payments rose to a 20-year high in the third quarter as borrowers were unable to refinance or sell their homes." Cleveland.com reported that three of its recent candidates for mayor have found themselves in the midst of foreclosure proceedings, showing that the crisis is touching people on all economic levels, not just the impoverished.

From all corners of the country come descriptions of neighborhoods simply ravaged by foreclosures, with empty houses taking over city blocks. A CNN headline explains what happens to such neighborhoods, like Slavic Village in Cleveland, stating "when every second house sits vacant, home values plummet and neighborhoods deteriorate." An Associated Press story published in the Boston Globe on November 18, 2007, describes just what that deterioration means to the Westview Village section of Atlanta, where 22 of its 85 homes are now empty -- "house fires, prostitution, vandals, and burglaries plague this historic neighborhood."

Muncie, Indian, reports an "overwhelming" number of empty structures and countless neighborhoods in California have been negatively impacted. According to a news report out of Minneapolis and St. Paul area "the snow brings a new problem with the high number of foreclosures in the Twin Cities. All those empty homes mean no one is around to clear the sidewalks."

Not only are those who actually lose their homes affected, but also those who remain behind in those neighborhoods. The value of the remaining homes go down as the neighborhood deteriorates, which means that the owners suffer serious financial loss, especially if they try to sell. In a market that is already suffering, it can be very difficult to get the money stilled owed on a house, let alone enough to start fresh somewhere else. This problem is exacerbated for those who have not only the original mortgage, but have also taken out home equity loans, lines or credit, or second mortgages.

It's not just existing neighborhoods that are suffering. According to a recent Atlanta Journal-Constitution headline, "foreclosure swallows new subdivisions before opening," with half-built homes and empty lots being sold right along with pristine never lived in houses, as a housing development folds even before completion. This, too, is happening all over the nation. Credit tightens up, builders are unable to complete projects that they have run out of cash for and those owning the development sites are unable to make the payments on the properties to keep them long enough to complete them for sale or rental.

Bloomberg.com reported "Toll Brothers Inc., the largest U.S. luxury-home builder, today reported its first quarterly loss in 21 years as fiscal fourth quarter revenue slid 35 percent from a year ago to $1.17 billion. Net income for the full fiscal year plunged 95 percent to $35.7 million, the lowest since 1993." And, that is far from the only home-building company to feel the pinch of less liquidity in the marketplace.

These sorts of problems reach out into the other sectors of the economy. Retail stores are affected by consumers having less money to spend. Some of those with less money to spend are those who, with the slow down in building, have lost their jobs. Consumer confidence, according to recent reports, "remained low, but stable, following a significant drop in November," which, considering that the holiday season is essential to the annual profit margin of many retailers, is not good news.

The odds are that there are many more headlines to come describing the financial and social problems brought about by the mortgage and lending meltdown. This fiscal crisis is a long way from being completely unwound, as there are still a series of mortgage resets to come, as well as trillions of dollars of mortgage backed securities floating around the global investment realm. For the individual, the near future would be best spent in trying to position oneself as securely as possible to ride out the challenging economic times to come.