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Economic collapse sharpens foreclosure crisis

Published Jan 27, 2008 10:38 PM

Racist, predatory lending practices of banks and major lending institutions have caused the subprime mortgage crisis to hit Detroit residents especially hard. The Detroit News recently reported that 72,000 homes in metropolitan Detroit—Oakland, Macomb and Wayne Counties—have faced foreclosure in the last two years. Detroit city’s foreclosure rate is 10 percent, with some neighborhoods as high as 17 percent.

Vanessa Fluker
WW photo: Kris Hamel

The mortgage industry considers a 1 percent foreclosure rate alarming.

The prevalence of subprime variable mortgages in Detroit combined with racism and the economic devastation that has hit the city’s population has led to an unprecedented crisis of home foreclosures. This crisis will only deepen in the coming months as more and more families find their mortgage rates increasing as the variable rates are set higher.

The foreclosure crisis in Detroit and Michigan affects the entire population. The many abandoned homes depress all property values. Homes are left vacant and stripped and neighborhoods decline further. Renters too are evicted when the owners are dispossessed.

The foreclosure catastrophe in Michigan must be viewed within the context of the overall economic tsunami that has engulfed this Midwestern state.

Grim statistics recently published confirm what poor and working people face in Michigan. Unemployment data released on Jan. 16 revealed that the state leads the country in job losses. A total of 90,000 jobs disappeared in 2007. Michigan’s official unemployment rate for last year hit 7.2 percent, according to the State Department of Labor and Economic Growth.

Workers lost 19,000 jobs in the auto industry, 16,000 in construction and more than 10,000 jobs in retail. Economists at the University of Michigan predict that up to 51,000 more jobs will disappear in the state during 2008. This is on top of the 336,000 jobs that were lost in the previous six years.

Researchers Joan Crary, George Fulton and Saul Hymans are forecasting that 21,000 jobs will be lost in Michigan this year in auto manufacturing alone. General Motors recently announced further restructuring and buyouts, with planned cuts of thousands more workers.

More than 40,000 people left the state in 2007 to seek work elsewhere. A study by United Van Lines showed that last year Michigan led the nation in the number of workers leaving their state. Nearly 68 percent of Michigan moves took workers out of the state, surpassing the state record of 67 percent during the 1981 auto recession.

A 2007 Census Bureau study documented that 33.6 percent of Detroiters earn incomes below the federal poverty line, and 47.8 percent of Detroit’s children live in poverty. The 2007 Kids Count in Michigan study revealed that African-American and [email protected] children are three times more likely to live in poverty than white children.

High health care costs

Health care costs are taking great chunks of workers’ pay. A recent study revealed that in 2007 more than a half million Michigan residents spent over 25 percent of their family income on medical-related costs, including prescription drugs or co-pays, health insurance premiums and deductibles. Eighty percent of these residents had health insurance.

An additional 1.5 million Michigan residents spent between 10 and 25 percent of their income on medical care. The Lansing State Journal, reporting on the study by FamiliesUSA, said the organization “considers more than 10 percent of income going toward health care as unaffordable for most middle-class and working-class families.”

While the federal and state governments claim there is no money to help poor and working people, Michigan taxpayers have already paid almost $13 billion just to fund the war on Iraq. Two-thirds of what Michigan families pay in federal taxes goes directly to the Pentagon to wage war against other poor and working people, in Iraq, Afghanistan or elsewhere.

Mass unemployment, foreclosures and homelessness, soaring medical costs, skyrocketing poverty—the statistics for Michigan are horrendous. Each number represents an individual or family suffering tremendous hardship and deprivation.

Mortgage loan horror stories

Vanessa Fluker is a Detroit attorney who represents poor and working people in many struggles for justice. She turned her attention last year to assisting those facing foreclosures and losing their homes. Fluker told Workers World some of the horror stories she has heard: “For instance, an individual has a loan under $60,000, yet the adjustable rate allows the payment to go up to a maximum of 18.25 percent interest. This is an actual loan, and to make matters worse, it’s a 40-year loan and not a 30-year loan.

“I have met with seniors,” said Fluker, “who come in for loan evaluations who have lived in their homes for 20, 30, sometimes 40 years, that have been persuaded or induced to enter into adjustable refinancing loans and their rates are now adjusting beyond their meager fixed income. One such instance is a senior who refinanced the home to help pay medical bills for her husband, who was dying of cancer. The mortgage adjusted, and after missing only one payment, a pre-foreclosure notice was sent demanding that she come up with an exorbitant amount of money.

“This woman actually borrowed that money, caught the payments up. The next month her husband died and the lender continued to hound her even though she was less than one month behind. Currently they are again seeking to place her in foreclosure on a home that she’s lived in for more than 40 years.”

The federal and state governments’ proposals to resolve the foreclosure crisis give little or no relief to the vast majority of those affected. These proposals amount to putting a band-aid on a gaping wound.

But there is a solution. The state constitution of Michigan declares that the health and welfare of the people is of primary concern. Under the law, the governor has not only the authority, but the duty, to declare a state of emergency during times of great public crisis.

A growing movement is demanding that Gov. Jennifer Granholm declare a state of economic emergency in Michigan and use her authority to impose a moratorium to stop all foreclosures for a five-year period.

A struggle to stop foreclosures

Organizers with the Michigan Emergency Committee Against War and Injustice (MECAWI), who are leading this struggle, point out that such a moratorium on foreclosures was in place in Michigan during the Great Depression of the 1930s, as well as in 25 other states.

MECAWI literature states: “The Mortgage Moratorium Act, Public Acts 1933-98, was enacted by the state legislature in the 1930s. This Act, as amended, halted foreclosures for five years during the Depression and allowed individuals facing foreclosure to stay in their homes, based on the paying of fair rental terms and just and equitable terms for the payment of taxes and insurance, as set by the courts.”

The Michigan Mortgage Moratorium Act was declared constitutional by the Michigan Supreme Court as well as the U.S. Supreme Court, which ruled that in time of public crisis the right of people to their homes takes priority over contracts with banks and lenders.

Only a united mass struggle of poor and working people will force the governor to declare a state of emergency and place a moratorium stopping foreclosures. A moratorium will give desperately needed relief to the people and allow a breathing space wherein a long-term solution to the crisis can be found.

An important step in this struggle will take place outside the Capitol building in Lansing, where Michigan activists and those facing foreclosures will gather on Jan. 29 while Gov. Granholm delivers her annual “state of the state” speech. MECAWI organizers will present the “state of the people” and demand a moratorium on all foreclosures, evictions, and utility shut-offs.

To get involved in this critical struggle, call (313) 319-0870 or visit www.mecawi.org.