The Economy Sucks Because Banks Are Still Sticking It To Overextended Home Loan Borrowers

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http://www.alternet.org/economy/economy-sucks-because-banks-are-still-sticking-it-overextended-home-loan-borrowers



If the Dow Jones Industral Average is hitting records highs, how come the economy where most Americans live still sucks?

The answer is not just that many people don't own stocks or that cash-rich businesses aren’t hiring, or other oft-cited trends such as stagnant wages or stubborn jobless rates. It’s because a giant slice of the housing market is still frozen, due to millions of underwater mortgages, and that is smothering local economies.

“Each house that is sold creates a number of jobs,” said YouWalkAway.com founder Jon D. Maddux, whose company advises people facing foreclosure. “There is a huge drain on the economy because of this.”

How serious is this economic undercurrent? It depends who you ask, but some affordable housing experts say that it is so big—with 27.5 percent of U.S. mortgage holders owing more than their house was worth as of December—that it helped push the U.S. mobility rate to its lowest level since the Census Bureau started tracking it decades ago. In other words, even though 792,000 people moved last year because lenders foreclosed or were evicted, 13.8 million were stranded with underwater mortgages as of December.

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1. Lending criteria is based on ability and willingness to repay

with ability assessed from income and willingness from past payments records largely held by credit data bases. Ignoring either aspect increases the inevitability of debts in the form of loans becoming delinquent debt.

Those currently unable to borrow are in some respects paying for the sins of others in the past and that's acknowledging that some past loans were fraudulent on occasions.