An American Nightmare
While homeownership is considered to be part of the American Dream, losing your home through foreclosure is its antithesis: the American Nightmare.
And a lot of people are experiencing that nightmare. During the past year, foreclosures went up 75 percent, a truly alarming figure.
The impact has been felt in nearly all business sectors, not just limited to the homeowners unable to pay their monthly mortgage, the real estate sector and mortgage brokers.
In Connecticut, about 5.5 percent of all home sales are now the result of a foreclosure action, according to the National Association of Realtors. While that figure is far below those of harder-hit states, the effects of the national mortgage meltdown are still being felt in the Nutmeg State.
Although economists maintain that Connecticut is holding steady, they expect about 7,000 jobs to be lost by the end of 2009. Just last week, Nerac in Tolland announced it was laying off 34 workers, its first major job cut in recent history.
Ahlstrom in Windsor Locks, which reduced 250 jobs in 2007, has announced it is looking to trim another 20 to 30 jobs through an early retirement package.
In the fall, Hood in Suffield shed 75 jobs.
And another sign of the times, the Tribune Co., which owns the Hartford Courant, announced that it would shave 45 jobs at the daily newspaper.
While these job losses aren’t large, it is a signal that the national credit crisis is weaving its way into the state’s economy.
It should also be noted that while the state may be slow to feel the same pain that other states are now experiencing, Connecticut was among the last states to recover from massive job losses following the Sept. 11 terrorist attacks.
Regardless of whether the fault for the current foreclosure eruption lies with mortgage brokers, too easy credit or foolish homeowners, one thing is for certain; its effects are beginning to hammer businesses. Doing nothing is clearly not an option.
Lawmakers need to evaluate a number of remedies quickly and thoroughly to circumvent an even steeper economic downward slide.
On the federal front, Sen. Christopher Dodd, chairman of the Senate banking committee, has proposed creating a federal program to buy “very distressed’’ mortgages at steep discounts. Under the proposed Federal Homeownership Preservation Corp., it would buy loans and finance them as 30-year, fixed-rate mortgages to help keep borrowers from losing their homes.
Dodd maintains that his proposal is not a bailout for homeowners or the mortgage industry, but rather a temporary, three-year remedy.
Based on a research paper released by the American Enterprise Institute, a conservative Washington think tank, the proposal is reminiscent of the 1930s Depression-era Home Owners’ Loan Corp., which was considered by many as a tremendous success for granting over one million, more affordable loans over a three-year period.
The federal government would need to allocate $10 billion to $20 billion to fund Dodd’s program.
While his proposal is a short-term fix — and further evaluation needs to take place to consider whether this is the right solution — both state and federal lawmakers need to look carefully at the circumstances that permitted the crisis to get out of hand in the first place.
Our economy depends on their careful consideration to protect what many of us take for granted as the American Dream.
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