Foreclosed America

By Isaac Martin and Christopher Niedt

From 2007 to 2012, almost five percent of American adults—about ten million people—lost their homes because they could not make mortgage payments. The scale of this home mortgage crisis is unprecedented—and it's not over. Foreclosures still displace more American homeowners every year than at any time before the twenty-first century. The dispossession and forced displacement of American families affects their health, educational success, and access to jobs. It continues to block any real recovery in the hardest-hit communities.

While we now know a lot about how this crisis affected the global economy, we still know very little about how it affected the people who lost their homes. Foreclosed America offers the first representative portrait of those people—who they are, how and where they live after losing their homes, and what they have to say about their finances, their neighborhoods, and American politics. It is a sobering picture of Americans down on their luck, and of a crisis that is testing American democracy.

• Language: English
• Publisher: Stanford Briefs
• Release date: Apr 1, 2015
• ISBN: 9780804795784

Isaac Martin

Isaac Martin is a recognized automotive technical writer for Super Ford Magazine.

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Stanford University Press

Stanford, California

©2015 by the Board of Trustees of the Leland Stanford Junior University.

All rights reserved.

No part of this brief may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Stanford University Press.

Printed in the United States of America

on acid-free, archival-quality paper

Library of Congress Cataloging-in-Publication Data

Martin, Isaac William, author.

Foreclosed America / Isaac William Martin and Christopher Niedt.

   pages cm

ISBN 978-0-8047-9513-5 (alk. paper)

1. Foreclosure—United States.   2. Mortgage loans—United States.   3. Foreclosure—Social aspects—United States.   4. Financial crises—Social aspects—United States.   I. Niedt, Christopher, author.   II. Title.

HG2040.5.U6M37 2014

332.7'50973—dc23

2014050012

ISBN 978-0-8047-9578-4 (electronic)

Typeset by Classic Typography in 10/13 Adobe Garamond

FORECLOSED AMERICA

ISAAC WILLIAM MARTIN and CHRISTOPHER NIEDT

stanford briefs

An Imprint of Stanford University Press

Stanford, California

I like to think how nice it’s gonna be, maybe, in California. Never cold. An’ fruit ever’ place, an’ people just bein’ in the nicest places, little white houses in among the orange trees. I wonder—that is, if we all get jobs an’ all work—maybe we can get one of them little white houses.

—Ma Joad, John Steinbeck’s The Grapes of Wrath

CONTENTS

Prologue

1. Ten Million People

2. Who Are the Foreclosed Americans?

3. Communities in Crisis

4. Disenfranchised and Disillusioned

Epilogue

Notes

This book presents the key findings from a survey of foreclosed Americans that composes part of the National Suburban Poll. The poll is conducted annually by Princeton Survey Research Associates International (PSRAI), in conjunction with the National Center for Suburban Studies at Hofstra University. Those readers who wish to know more details about the polling methods, the statistical techniques used to analyze the polling data, or the numerical results of particular statistical analyses can find detailed descriptions and statistical tables in the methodological appendix, which is online at http://www.sup.org/foreclosedamerica.

PROLOGUE

What does a crisis look like? This was the view from Isaac’s neighborhood:

In 2004, like tens of thousands of other people, I decided to buy a home in San Diego. It was a seller’s market. Prices were going up fast. I thought that if I bought a home, those rising property values could be a big chunk of my retirement savings; and I was afraid that if I did not buy a home, I might be priced out of the market forever.

My first day looking at homes was also my last. After a long day of disappointments (the interior of one condo was damp and mossy from the winter’s heavy rains, and another was dark as a cave at midday) my real estate agent brought me to a sunny little condominium apartment with a patio and a nice kitchen in a walkable urban neighborhood. It was small, but it was the only decent unit I had seen, and if I wanted it, I thought, I had to make an offer immediately. Housing prices were going up faster than the pay scale at my job; I feared that soon even a small apartment like this one would be out of my reach. The local alternative paper had just published a story about the real estate bubble. But I also remembered reading in the newspaper that Alan Greenspan, the chairman of the Federal Reserve, had said that there was not a housing bubble. Who are you going to believe, I thought, someone you never heard of who writes for the San Diego Reader, or the chairman of the Federal Reserve? I bought the condo.

My new neighbors were first-time home buyers like me. Many of them had stretched financially to afford a down payment. It seemed like a good time to make the stretch. If you took the right kind of mortgage, you could get starting interest rates lower than anyone could remember. There was no sign that interest rates were going up anytime soon; and when your mortgage payments did start to go up, you would still have time to lock in a relatively low monthly payment by refinancing. In the meantime, the value of your home would have increased, and with more collateral you could expect better loan terms. That’s how it had worked for other people I knew.

But soon home prices stopped going up. When my neighbors’ mortgages reset to higher interest rates, some of them could not refinance. Other calamities befell them, too. One couple in my neighborhood split up; without two incomes, the partner who stayed could not afford the mortgage, and soon the condo was in foreclosure. Another acquaintance in my neighborhood got a diagnosis of cancer. When his medical bills came due and his mortgage reset to a higher monthly payment, he had to choose whether to pay the medical bill or the mortgage bill. He chose the medical bill. Yet another neighbor was laid off from his job. Before long, many of the homes in my neighborhood—including several units in my building—were in foreclosure.

As foreclosures spread, my up-and-coming neighborhood started to feel like a neighborhood on the way down. More and more homes stood vacant. You could tell the foreclosed homes by the empty driveways and the padlocks on the door. More and more storefronts stood empty, too. I felt lucky that I could stay in my home. But my life savings weren’t worth much anymore, because I had sunk them all into buying the home, and now banks were auctioning off basically identical homes for less than half the price I had paid.

Four years after I bought the condo, almost to the day, I woke to a steady dripping sound. Water was seeping through my bedroom ceiling. The apartment above mine was in foreclosure, and while it stood vacant, the plumbing had sprung a leak. I was literally underwater.

Many Americans who were first-time home buyers in the boom years could tell similar stories about displaced neighbors, disappearing life savings, and nuisance properties left behind. Most of these first-time buyers did not lose their homes to foreclosure, but many of them felt the external costs of foreclosures in their neighborhoods. Like Isaac, most of them probably lost track of their former neighbors.

This book is about those displaced neighbors and what happened to them next. It goes beyond individual stories to present the first representative portrait of the Americans who lost their homes in the mortgage foreclosure crisis in the years from 2007 to 2012. We draw on original survey research conducted in the peak years of the crisis to describe who those dispossessed Americans are, where and how they are living now, and what they have to say about the quality of life in their communities and about American politics. The details add up to a sobering picture of American people and communities down on their luck. The people who lost their homes in the foreclosure crisis are in most respects as diverse as American adults as a whole, except that their financial circumstances are worse, their neighborhoods face more social problems, and they have little voice in politics.¹

Like any work of scholarship, this book is also personal, and it reflects our own training and experiences. Isaac is a professor of sociology. He teaches in a program on urban studies, and he has spent more than a decade conducting research on the political economy of housing, property taxes, and mortgage markets. San Diego, where he lives, was one of the most overheated housing markets during the boom years. Many of his students became homeless during the crisis.

Chris is a professor of sociology and the academic director of the National Center for Suburban Studies. His graduate training was in urban geography, and he has written and edited several books and articles about housing displacement and diversity in the suburbs. He lives in New York City, near the center of the financial industry, and teaches at a suburban university close to neighborhoods that had some of the highest foreclosure rates in the region. He has also collaborated with grassroots community groups to measure the extent of the crisis, and to develop a response to the crisis in the hardest-hit communities. He has worked with community members to develop a land trust that would acquire foreclosed properties and resell them as permanently affordable owner-occupied homes.

In addition to our professional reasons to pay attention to the politics of mortgage foreclosure, we share a sensibility and a generational experience, both of which informed this book. We were born in the 1970s. Our parents’ generation benefited from federal regulations that stabilized the mortgage market for decades after the Great Depression. We grew