The foreclosure crisis impacted the lives of 8 million American children, and has left them and their parents at increased risk of homelessness and poverty, a Brookings Institution report says.
A study by Brookings scholar Julia Isaacs said 2.3 million children lost homes during the first wave of foreclosures. Another 6 million could face foreclosure in the near future or an eviction from a foreclosed property.
The scope of the tragedy is recognized within the mortgage finance industry. In analyzing the Brookings report, Rick Sharga, executive vice president at Carrington Mortgage Holdings, said there's one major point missing from the study, though.
"It is very likely that those famlies who are being displaced are going to become renters," he said. "The policies they are talking about probably would be helpful, but the problem is we have 97 percent rental occupancy rates nationwide, which makes affordability worse. If you are a distressed family coming off a foreclosure, the last thing you need is escalating rental rates."
Sharga said some investors are already interested in acquiring REO properties and turning them into affordable rental homes.
While children in every U.S. state are feeling the effects of the mortgage crisis, hardest hit states include California and Florida, the Brookings Institution said.
In California alone, more than 500,000 children have gone through a completed foreclosure. Another half million are living in homes where the mortgage is 60 or more days past due.
The nonprofit is asking officials to quickly distribute billions in funds that came to the states as part of the $25 billion national mortgage-servicing settlement between 49 state attorneys general and the nation's five largest mortgage servicers.
"We also urge the newly named independent monitor, who is responsible for overseeing these reforms, to ensure that servicing reforms are implemented quickly to better protect families from losing their homes, or to slow the foreclosure process to allow families more time to find new, permanent housing," the First Focus Campaign for Children said.
The agency also seeks a bill similar to the Permanently Protecting Tenants at Foreclosure Act of 2011 to be passed this year.
The bill, which was proposed last year, aims to extend the PTFA program beyond its current 2014 sunset date by making it permanent.
The original act, which took effect three years ago, gave renters a minimum 90-day notice before permitting an eviction on tenants living in a foreclosed property. The nonprofit wants another update to the bill to make the 90-day eviction window permanent beyond the 2014 expiration date. The bill also gives tenants a right to pursue court action if their rights were violated through the foreclosure proceeding.
Along with other initiatives related to homelessness prevention, the First Focus Campaign wants Congress to add $1.7 billion more in funds above the president's 2013 budget request for allocation to the U.S. Department of Housing and Urban Development.
"This is the amount needed in order to maintain current levels of assistance for HUD's three largest rental assistance programs for low-income households: the housing choice voucher program (Section 8 vouchers), public housing, and Section 8 project-based rental assistance programs," the First Focus Campaign said. "Currently, families with children make up 42 percent of those served by Section 8 housing choice vouchers, as well as 27 percent of project-based rental assistance, and 35 percent of public housing."
Sharga believes that one of the best solutions would be to move forward with REO-to-rental initiatives that would allow investors to rehabilitate properties in communities, thereby increasing the affordable rental inventory.
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