Foreclosures Put 8 Million Children At Risk, Study Says

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By Kerri Panchuk

The foreclosure crisis impacted the lives of 8 million American children, and has left them and their parents at increased risk of homelessness and poverty, a Brookings Institution report says.

A study by Brookings scholar Julia Isaacs said 2.3 million children lost homes during the first wave of foreclosures. Another 6 million could face foreclosure in the near future or an eviction from a foreclosed property.

The scope of the tragedy is recognized within the mortgage finance industry. In analyzing the Brookings report, Rick Sharga, executive vice president at Carrington Mortgage Holdings, said there's one major point missing from the study, though.

"It is very likely that those famlies who are being displaced are going to become renters," he said. "The policies they are talking about probably would be helpful, but the problem is we have 97 percent rental occupancy rates nationwide, which makes affordability worse. If you are a distressed family coming off a foreclosure, the last thing you need is escalating rental rates."

Sharga said some investors are already interested in acquiring REO properties and turning them into affordable rental homes.

While children in every U.S. state are feeling the effects of the mortgage crisis, hardest hit states include California and Florida, the Brookings Institution said.

In California alone, more than 500,000 children have gone through a completed foreclosure. Another half million are living in homes where the mortgage is 60 or more days past due.

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First Focus Campaign for Children, a group that promotes the welfare of children, says the foreclosure wave changed the nature of homelessness from a single-adult issue to a family-with-children crisis. The organization outlined policy goals that it believes Congress and the president should adopt to aid families with children.

The nonprofit is asking officials to quickly distribute billions in funds that came to the states as part of the $25 billion national mortgage-servicing settlement between 49 state attorneys general and the nation's five largest mortgage servicers.

"We also urge the newly named independent monitor, who is responsible for overseeing these reforms, to ensure that servicing reforms are implemented quickly to better protect families from losing their homes, or to slow the foreclosure process to allow families more time to find new, permanent housing," the First Focus Campaign for Children said.

The agency also seeks a bill similar to the Permanently Protecting Tenants at Foreclosure Act of 2011 to be passed this year.

The bill, which was proposed last year, aims to extend the PTFA program beyond its current 2014 sunset date by making it permanent.

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Foreclosures Put 8 Million Children At Risk, Study Says

Quarterly increase in foreclosures: +32%
# of Foreclosures Q3 2011: 2,273
Unemployment: 7.6%
% home value down from peak: -12.42%

Columbus hit its median home value peak in the first quarter of 2006. Since that time, home values have declined a relatively modest 12.4%, including a 3.4% drop last year. By the second quarter of 2012, Fiserv projects that homes in the area will lose another 2.3% of their value. Median family income in Columbus is above the national average, and unemployment is just 8%, a full percentage point less than the national average. Despite the fact that things don’t look so bad for the Columbus housing market compared to other regions, the city foreclosure rate still increased by 32% last quarter. A total of 2,273 homes were foreclosed upon during that time.

See foreclosed homes for sale in Columbus, Ohio

Quarterly increase in foreclosures: +35%
# of Foreclosures Q3 2011: 1,743
Unemployment: 11.2%
% home value down from peak: -59.3%

There is arguably no single housing market with a worse long-term outlook than southwest Florida, and the Cape Coral-Fort Myers region is the worst of these. Housing prices in the have already dropped 59.3% from their peak, and Fiserv project them to decline another 12.2% by the second quarter of next year. According to Corelogic, 47% of the homes in the Cape Coral-Fort Myers area are worth less than their mortgages because of declining values. Foreclosures have increased 35% in the last quarter, and with no sign of recovery in the immediate future that trend may worsen in the coming months.

See foreclosed homes for sale in Fort Myers, Fla.

Quarterly increase in foreclosures: +36%
# of Foreclosures Q3 2011: 1,348
Unemployment: 11%
% home value down from peak: -59.1%

As of last month, Vallejo-Fairfield had the second-highest foreclosure rate in the country, with one out of every 51 homes being foreclosed upon in the third quarter of this year. This was a 36% increase in foreclosures from the second quarter. Home values have dropped 7.5% in the past year and are projected by Fiserv to drop an additional 4.9% by the second quarter of 2012. A remarkable 53% of homes in the region are worth less than their mortgages. This is the seventh highest rate of homes with underwater mortgages in the country.

See foreclosed homes for sale in Fairfield, Calif.

Quarterly increase in foreclosures: +41%
# of Foreclosures Q3 2011: 2,174
Unemployment: 14.9%
% home value down from peak: -54%

Fresno’s economy has continued to suffer since housing prices began to drop in 2006. It currently has an unemployment rate of 14.9%, which is one of the highest in the country. Home prices peaked in the first quarter of 2006 and have been decreasing since. The metropolitan area also has one of the highest underwater mortgage rates in the country, with a negative equity share of nearly 46%. In the last year alone home prices have dropped 11%.

See foreclosed homes for sale in Fresno, Calif.

Quarterly increase in foreclosures: +44%
# of Foreclosures Q3 2011: 1,039
Unemployment: 11.6%
% home value down from peak: -53.4%

More than 1,000 homes were foreclosed upon in the Palm Bay-Melbourne-Titusville region last quarter, a 44% increase from the previous three-month period. Nearly half of the region’s homes are worth less than their mortgages. With Fiserv projecting home values would drop 7.1% by next year and another 4.9% the year after that, things may just get even worse.

See foreclosed homes for sale in Titusville, Fla.

Quarterly increase in foreclosures: +49%
# of Foreclosures Q3 2011: 2,559
Unemployment: 9.5%
% home value down from peak: -39.3%

Jacksonville has experienced a quarterly increase in foreclosures of nearly 50%. Home prices have dropped 39.1% since their peak in the second quarter of 2006. The metropolitan area’s negative equity share also exceeds 46%, making it among the worst in the country for underwater mortgages. Home prices are expected to decrease another 10.7% by the second quarter of 2012.

See foreclosed homes for sale in Jacksonville, Fla.

Quarterly increase in foreclosures: +55%
# of Foreclosures Q3 2011: 1,956
Unemployment: 8.7%
% home value down from peak: -15.9%

Nearly 2,000 homes were foreclosed upon during the last quarter, a 55% increase from the previous three months. Unlike many of the regions on this list with accelerating home foreclures, Cincinnati’s local economy is doing fairly well. Home prices are only down 15.9% from their peak in the first quarter of 2006. Unemployment and median family income are both better than average. One possible explanation for this recent increase may be that nearly a third of the total decline in home value since the peak has occurred in the past 12 months.

See foreclosed homes for sale in Cincinnati, Ohio

Quarterly increase in foreclosures: +57%
# of Foreclosures Q3 2011: 1,673
Unemployment: 11%
% home value down from peak: -51.4%

The Sarasota-Bradenton-Venice metropolitan area has seen the third largest increase in the country in foreclosures in the third quarter. However, only 1,673 homes out of the 311,475 on the market were foreclosed upon. The housing market has suffered a great deal since housing prices peaked in the first quarter of 2006. Since then, overall home prices have dropped 51.4%.

See foreclosed homes for sale in Venice, Fla.

Quarterly increase in foreclosures: +67%
# of Foreclosures Q3 2011: 2,003
Unemployment: 6.6%
% home value down from peak: -15.8%

The Boston metropolitan area is considered to have a particularly resilient housing market. In the most recent quarter, however, foreclosures have increased 67%. Home prices have only dropped 15.8% since they peaked in the third quarter of 2005. The national average is -32.3%. From the second quarter of 2010 to the second quarter of 2011, home prices dropped a mere 1.7%.

See foreclosed homes for sale in Boston, Mass

Quarterly increase in foreclosures: +151%
# of Foreclosures Q3 2011: 1,358
Unemployment: 6.9%
% home value down from peak: -14.9%

Albuquerque’s housing market, like Boston’s, is relatively healthy. While home prices decreased 32.3% nationally after their peak, home prices in Albuquerque only decreased 14.9% since they peaked. Regardless, foreclosures have recently skyrocketed. In the third quarter of 2011, the number of foreclosures in Albuquerque increased 151%. According to New Mexico Business Weekly, the lack of job creation in the area has been a major contributor to this problem.

See foreclosed homes for sale in Albuquerque, N.M.

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The original act, which took effect three years ago, gave renters a minimum 90-day notice before permitting an eviction on tenants living in a foreclosed property. The nonprofit wants another update to the bill to make the 90-day eviction window permanent beyond the 2014 expiration date. The bill also gives tenants a right to pursue court action if their rights were violated through the foreclosure proceeding.

Along with other initiatives related to homelessness prevention, the First Focus Campaign wants Congress to add $1.7 billion more in funds above the president's 2013 budget request for allocation to the U.S. Department of Housing and Urban Development.

"This is the amount needed in order to maintain current levels of assistance for HUD's three largest rental assistance programs for low-income households: the housing choice voucher program (Section 8 vouchers), public housing, and Section 8 project-based rental assistance programs," the First Focus Campaign said. "Currently, families with children make up 42 percent of those served by Section 8 housing choice vouchers, as well as 27 percent of project-based rental assistance, and 35 percent of public housing."

Sharga believes that one of the best solutions would be to move forward with REO-to-rental initiatives that would allow investors to rehabilitate properties in communities, thereby increasing the affordable rental inventory.

See also:
Fair Housing Group Sues U.S. Bank Over Foreclosures
Foreclosure-Review Offer Getting Few Takers, Report Says
How to Avoid Foreclosure: Steps You Can Take to Keep Your Home



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