Commentary
Foreclosure USA
By Joel S. Hirschhorn
Online Journal Contributing Writer


Oct 27, 2006, 00:49

We the people once owned our democracy. We elected �representatives� to run it for US. Have you noticed that somewhere along the way we lost our democracy?

It was foreclosed by wealthy and power elites that corrupted our �representatives� who literally sold us out. Our homeland was foreclosed right in plain sight. Sure, we citizens still reside in the USA, but we no longer own our democracy. We pay rent through our taxes. But we no longer have any equity. Our democracy is owned by the rich, and their partner foreign elites and governments, which is why in a strict sense it no longer is a democracy, but rather a plutocracy.

Modern day aristocrats -- an apt term considering the many political dynasties in our ruling class -- maintain the charade that America is still a democracy by letting us vote. They also give us many freedoms to distract us from our dire political conditions. They�re smart, so they limit our choices to the main parties that constitute the two-party duopoly. Even smarter, they convert consumer spending (that they spur) into economic inequality, making them, the rich, even richer and everyone else, all of us, poorer.

Donald Trump says we hardly have any middle class left. He ought to know. Lou Dobbs says there is a war on the middle class. He does not say what would only depress his audience, even more. We the people have already lost the war. We have a large Upper Class, for whom prosperity is real, and an expanding Lower Class, for whom economic slavery based on compulsive borrowing, debt and spending is all too real.

How We Lost Democracy Ownership

People born into American citizenship or sworn into it have inherited a democracy debt -- a kind of political mortgage -- that requires payment, not in dollars, but in engaged and responsible citizenship, ensuring that those elected to manage the government do so in the public interest. People like Thomas Jefferson told us about the burden placed on Americans. But paying our democracy mortgage has declined over the past 50 years.

I postulate that the decline started after World War II with the advent of urban sprawl, speeding up with accelerating suburban sprawl. Now, political divisiveness coexists with sprawl on steroids, with gated non-communities of McMansions for the Upper Class. As to the politics of sprawl, Americans traded democracy ownership for home ownership. They stopped paying for democracy through engaged citizenship and started paying for compulsive consumption. True citizenship was replaced by social isolation and loss of social capital as people cocooned themselves in their private space where they could gratify themselves with more and bigger possessions.

With sprawl and all the enabling automobile addiction, roads and chain stores, the power elites knew exactly what they were doing. They made Americans time poor and too tired to be politically active. Through distraction based on borrowing and spending they suckered Americans into defaulting on their democracy debt. Democracy was foreclosed, without any notice letter being sent to us. Ownership was transferred to the rich and powerful elites sitting atop the corporate state and, not coincidentally, making tons of money from land development and home building. Wal-Mart was elected corporate wage-killer-in-chief.

Delusional Ownership

Which brings us to our current new twist on Foreclosure USA. Millions of Americans have experienced, or will soon experience, foreclosure on what once was hyped as the cornerstone of the ownership society -- they are losing their homes. The bursting of the housing bubble is often talked about in terms of slower home sales and lower prices. The latest data: In September, the number of existing single-family homes sold dropped 14.2 percent, compared to September 2005, and the median price dropped by $5,000.

But something much worse is happening and accelerating in virtually every community in all the states. In a delusional democracy with delusional prosperity we now are witnessing the proof that the ownership society is also delusional. Apparently no one has told George W. Bush.

Up to 4 percent of America's mortgaged homeowners might lose their homes to foreclosure in coming months, one of the nation's largest lenders predicted recently, as those homeowners find themselves trapped by heavy debt and the housing slump. That's four times worse than the historical average of one in 100 mortgaged homeowners who fail to keep up payments. First American Loan Performance, a mortgage-data company based in San Francisco, says overall the national foreclosure rate has climbed 27 percent from a year ago with an estimated $110 billion worth of homes expected to go into foreclosure.

Rick Sharga, a vice-president at RealtyTrac, said recently "Over a trillion dollars is going to readjust in the next 15 months. We had almost 850,000 foreclosures last year and we are at 913,000 through September." He predicted that national foreclosures could hit 1.2 million to 1.3 million by the end of this year. Guess George W. Bush has not heard about this, only about great economic growth.

You probably have heard about the incredible amount of sprawl housing growth around Las Vegas. But not this: The number of foreclosures in Nevada has more than tripled in the past year and jumped 83 percent since May. Nevada recorded 2,016 foreclosures in August. That was 83 percent more than in May and 255 percent more than in August 2005. Foreclosures are rising at a faster rate in Nevada than the rest of the country, where they are up 24 percent since May. In California, foreclosures increased 43 percent since May.

And what about the ever-sprawling Sunshine State? Florida has one new foreclosure filing for every 254 households, more than four times the national average. Foreclosure activity in the third quarter of 2006 rose by 14 percent compared to the second quarter of the year. It was 39 percent higher than the same period last year.

How about the Northeast? In Massachusetts, 1,812 new foreclosures were initiated in August, which is 72 percent more foreclosures than August of last year, and 266 percent more than in August 2004. The July to August increase was 34 percent, making it the largest month-to-month increase in the past three years. When comparing foreclosures during the year ending Aug. 31 (15,309), to the previous year (10,517), foreclosures increased statewide by nearly 46 percent.

Nationally, in August, 115,292 new properties were listed on the database of online foreclosure tracker, RealtyTrac, a 24 percent increase over the level in July. More significantly, RealtyTrac currently lists 650,000 properties nationwide in foreclosure or pre-foreclosure, up from 75,600 just one year earlier, when the Gulf Coast was devastated by Hurricane Katrina.

The volume of bank seizures is immense. Foreclosure.com, another online tracker of distressed properties, currently lists more than 1.27 million properties in some stage of foreclosure, bankruptcy, or bank auction. Approximately 5,000 properties are added to the listings each day.

Getting behind in mortgage payments is one thing, called default. It's estimated that nearly 20 percent of homeowners in default earlier in the year lost their homes to foreclosure in the third quarter. That's a more than a three-fold increase over last year, when the default-to-foreclosure rate was only 6 percent. Meaning: People are having a harder time coming up with cash to cover mortgage debt. Guess Bush has not heard about this.

Are things going to get worse? You better believe it. Industry forecasters recently estimated that more than $200 billion worth of adjustable rate mortgages will "reset" at higher rates in 2006 and more than $1 trillion will reset in 2007. This situation, compounded by the expected slowing of the economy and the down housing market, which includes a growing inventory of unsold homes, will almost certainly push more homeowners into the foreclosure process.

Despite a lot of talk about the mortgage issue and warnings, Americans are still diving in. Are they falling for the economic hype coming out of the White House? Incredibly, 39 percent of new mortgages in the first half of this year were non-traditional, high-risk mortgages compared to an average 2 percent over the last decade.

Consumer debt burden is ballooning. Statistics from the Bureau of Economic Analysis show that the personal savings rate has been running in the red for 16 months. Additionally, the Federal Reserve recently found that consumer debt has outpaced, by 18.7 percent, the amount of income left after the payment of bills each month, meaning that for millions of families the cost of living is substantially higher than their monthly incomes can accommodate. Guess Bush has not heard about this.

An enormous portion of the total personal debt is mortgage debt. Since 2000, mortgage debt in America has doubled, approaching $9 trillion. This year, $400 billion of this debt is coming due in the form of mortgage readjustments. Research firm LoanPerformance forecasts another $1 trillion in mortgage debt will come due next year as the rates on millions more loans reset, sending individual monthly mortgage payments hundreds of dollars higher, or even worse.

In one, not unusual, case in the Washington, D.C. area, a family started with a �teaser rate,� just $1,700 a month. They thought it was fixed, but it wasn't. Rising interest rates and deferred interest have now ballooned that payment to $3,700 a month. They can't pay it, and they're not alone. They will lose their home. Credit counselors say they're getting 10 times the concerned calls they used to.

Greedy Elites Conned Us

How has this come about? Clever elites running and ruining our country discovered all kinds of ingenious ways to sell mortgages to Americans still believing in the American dream. They had help from the Federal Reserve. So-called unconventional or exotic mortgages were crafted to lure people in and make billions of dollars for the financial sector. The whole trick was to get home buyers to pay as little as possible initially. No cash down, no payments toward the principal and low adjustable interest rates were the main ways to pump up the housing market (the bubble) and, therefore, the whole economy. Yet another gambit was to give mortgages to people who really could not afford them, making them pay higher interest. These "sub-prime" mortgages create a debt to income ratio that is out of whack, which means mortgage payments that take too big a chunk of income. When interest rates rise and other costs of living creep up, people quickly sink and drown in debt.

The maximum percentage for household debt which would include a mortgage, credit cards and car payments is supposed to be around 36%. But now many homeowners find themselves paying most of their income -- more than 50 percent -- to their mortgage, especially after those monthly payments increase sharply. And they are going up because of rising interest rates, which is happening as wages are at best stagnant and other costs of living are rising. Once, homeowners in a hot housing market could refinance and take money out. In fact, from 2001 to 2005, they took out $500 billion in cash from their home ATMs. This propped up consumer spending as wage incomes stagnated, keeping the economy looking good. Now, with home values declining, they can find themselves forced to pay a lot more or lose their homes.

Look at the larger picture. In 1980, household debt, including mortgages, car loans and other borrowing, was $1.4 trillion. Guess what it was in 2005? It had skyrocketed some 745 percent to $11.8 trillion. In 1980, credit card debt totaled $69 billion. Guess what it was in 2005? It had mushroomed to an amazing $1.8 trillion -- a 2,500 percent increase! In 1980, credit card debt was just 5 percent of household debt; by 2005 it had jumped to 15 percent. This has happened when people also got suckered into risky mortgages.

Maintaining consumer spending has been the chief economic goal of the plutocracy. And to keep it growing it required Americans to be convinced that they should borrow more and go into greater debt. What kind of political leaders would want to do this to their citizens? The worst kind: Democraps and Republicrooks. Corrupt politicians care more about making corporations profitable and the rich richer. Economic inequality is like a cancer. They are willing to destroy the middle class on behalf of elites and the Upper Class.

Last Episode

What is the next installment in Foreclosure USA? Our enormous national debt owned in large measure by foreign interests can foreclose whenever they wish. Just as we the people lost our sovereign control of our nation, so too will our corrupt government lose sovereign control. With globalization, so heralded and hyped by New York Times elitist and plutocrat Tom Friedman, moving forward, American sovereignty will surely be foreclosed. Thus ending the Foreclosure USA saga.

What can we do to stop Foreclosure USA? Will electing Democraps do it? I doubt it. We the people must take back our ownership of our democracy. With too little political choice, our votes will not do the job. Our money is more powerful. We must politicize consumer spending. We must have some radical, dissent-driven leadership from true progressives to send signals to the tens of millions of disgruntled Americans to cut their discretionary spending to achieve specific political reforms.

Money and greed have ruined our country. Money and citizen re-engagement can save it.