Hidden Costs of the Foreclosure Crisis

Even though statistics indicate that foreclosure activity has slowed, it is anticipated that the foreclosure crisis is only halfway over. The Center for Responsible Lending expects that there will be 3 to 5 million more foreclosures in the next couple of years. This drawn out foreclosure crisis has long lasting effects for families that lose their homes as well as the communities in which they reside.

To comprehend the severity of the ongoing foreclosure crisis, check out these stats: In 2003, one out of very 38 homeowners was seriously delinquent (90 days or more past due on their mortgage payments) or in foreclosure. Today, that number is one out of ten.

Some repercussions of the foreclosure crisis are easily visible. The displacement of families, crime issues as properties go vacant, shattered credit scores, falling home prices, and the loss of equity can all be seen and felt. Other consequences are less immediately obvious but have lasting impact.

Bruce Lesley, president of First Focus, an advocacy group for children and families, said, “The bad thing about this recession: It’s been long and deep. One of the interesting things is that it has given people time to look at the secondary effects of things.”

The effects are devastating for children. Eight million children, or one in ten children, will be directly affected by the foreclosure crisis before it is over. This includes children of homeowners as well as children of renters evicted due to a foreclosure.

Julia Isaacs, of the Brookings Institution, called children the “invisible victims” of the foreclosure crisis. In addition to the emotional trauma of leaving home, there are implications in educational development as well. Lesley says, “Dislocation is like missing a whole month of school.” When children are dislocated, the chances of being held back or dropping out increase dramatically.

Foreclosure also has negative health impacts on children and families. Nutrition is often sacrificed when a family is cash- strapped and visits to the doctor are less frequent. There is also a correlation between the increase in foreclosures and increase in medical visits for mental health, preventable conditions, and stress- related complaints. It is estimated that 2.82 million foreclosures in 2009 led to 4.18 million additional non-elective hospital and ER visits among those aged less than 65. These ER visits cost an average of $2,521 per visit, which makes a total of $10.5 billion spent on additional visits in 2009 alone.

Finally, the foreclosure crisis has affected many communities. James Brooks from the National League of Cities says that the loss of property tax revenue due to foreclosures has lead to cuts in services, such as swimming pools and senior centers. Budget cuts have also resulted in less community policing. At the same time, vacant foreclosure properties are destabilizing neighborhoods and vacant buildings can be a magnet for crime.

While it is easy to see the immediate impact of foreclosure, these are lasting impacts that will have repercussions on children, families, and communities for years.

For more information, read Amy Hoak’s article “Three Hidden Costs of the Foreclosure Crisis.”