Impact of Foreclosures Goes Far Beyond Economic Damage

By Caitlin Vega, California Labor Federation

The foreclosure freefall is nothing new in California. We all know families who have lost their homes, and others who are struggling to hold on as their loan rates adjust and balloon payments are triggered. Our state has been devastated top to bottom by the aftermath of this totally preventable crisis.

A new report concludes that the impact of foreclosures goes far beyond economic damage. The study conducted by the Alameda County Public Health Department and the housing rights group Causa Justa found that those who have had homes foreclosed on are twice as likely to report that their mental and physical health has declined. Anxiety and depression are commonplace in these families. Many cite increased crime in their communities as a result of mass foreclsoures, as well as the strain caused by dislocating their children from friends and schools due to a forced move.

This latest report only underscores the need to protect families from the harm caused by foreclosures. Unfortunately, the lending industry that aggressively marketed sub-prime loans is now resisting efforts to protect borrowers from unnecessary foreclosures. SB 1275 (Leno) would have required lenders to inform a homeowner that a loan modification had been denied prior to initiating a foreclosure. A modest protection, this bill would have simply prevented banks from selling a home while the family living inside it still believes they are getting a loan modification.

This bill passed the State Senate but died on the Assembly floor. Its defeat shows the power of the big banks to stop even modest protections to keep families in their homes. At a time of record unemployment, it is a real shame to keep bailing out the banks while turning a blind eye to the suffering of California’s familes.