An estimated two-thirds of families in the United States are reported to own their homes--the most ever. In reality, however, many so-called "owners" are locked into a lifetime of mortgage payments, having been enticed by attractive interest rates into buying relatively expensive houses. A significant number have taken out second and even third mortgages on their homes.

According to the Mortgage Bankers Association of America, banks and other creditors began foreclosing on 134,885 mortgaged homes in the second quarter of this year. At about four in every 1,000, that’s the highest rate in the 30 years during which the association has compiled such records.

By the end of June the backlogs held by these institutions of homes awaiting foreclosure had risen to a record 414,772.

Alongside these foreclosures and accompanying evictions, record numbers of people are applying to place their homes under Chapter 13 of the federal bankruptcy code. By the middle of this year more than 220,000 people had taken this step, an 8 percent rise over the previous year and the highest level ever.

Chapter 13 bankruptcy, also known as "individual debt adjustment" or "repayment plan," generally involves people who have fallen behind in their mortgage payments but retain a source of income. Under its provisions individuals are able to stave off creditors from repossessing their homes, and get limited-term relief from wage garnishments, liens, and other methods used to collect debts. The payment plan lasts from two-and-a-half to five years.

The Chapter 13 filings fit into the soaring number of personal bankruptcies, which reached an all-time high of 1.55 million people over the past year. Bloomberg.com reported in November that personal debt in the United States has reached a staggering $8 trillion, including credit card debts and mortgages. "Repayments are coming due amid a slow recovery from recession that is contributing to joblessness and pushing stock prices toward a third straight losing year," the online news service noted.  
 
Higher portion of income on housing
As house prices and rents continue to rise, working people are forking out greater chunks of their income on housing. According to a report from Harvard University, house prices have been leaping ahead of incomes in most large U.S. cities. Since 1997 prices have increased by more than 30 percent in eight of the largest metropolitan areas.

In the New York boroughs of Bronx and Brooklyn the prices of single-family homes rose by around 57 and 61 percent on average during the 1990s. Residents spend at least 35 percent of their paychecks on housing, placing these areas at the top of the country in spending on shelter--leap-frogging over Hudson County, New Jersey, Miami-Dade, Florida, and a dozen counties along the coast of California that were at the top in 1990.

The 2000 census for New York City reported that in four of New York’s five boroughs housing costs rose while median household income declined, with Manhattan being the sole exception. Resident Mary Sauri, who retired early from the Verizon company and was recently laid off from a telemarketing firm, told reporters that she pays more than 60 percent of her income for the $180,000 brick-row house she purchased in Brooklyn.

The Department of Housing and Urban Development (HUD) defines "affordable housing" as a home that costs less than 30 percent of a family’s income in either rent or monthly mortgage payments.

In recent years lenders and home builders in the housing industry have eased their criteria for granting housing loans. Before, they limited loans to a level that allowed buyers to spend no more than 28 percent of their income on mortgage payments--thus in their eyes reducing the risk of delinquency and default. Now the rules have been relaxed to permit smaller downpayments and allow home buyers to allocate more of their income toward mortgage payments.

As capitalists in the housing sector, from banks to real estate companies to construction firms, lined their own pockets by encouraging customers to go deeply into debt, many people got trapped into purchasing houses they could not afford, lured by adjustable rate mortgages with low "teaser" rates that quickly climb, the Wall Street Journal reported. Loans were based on the value of houses, and not necessarily on residents’ ability to pay.

Companies like home builder Dominion Homes rake in monthly checks from residents who have then had to abandon their homes once they found they couldn’t keep up with rising interest rates and higher than expected property taxes.

One of Dominion’s customers, help-desk employee Rob Jones and his wife, a merchandise handler for Sears, lost their home in Columbus, Ohio, last year. They declared bankruptcy after being unable to keep up monthly house payments that increased from $650 to $1,100 as the interest rate on their loan climbed upward. "I feel now that I wasn’t told everything upfront," said Jones.

Almost half the 15 homes on the Jones’s block in the South Village development of Dominion Homes are empty or for sale. Dominion Homes defends its business dealings, declaring that it was administering a government program of the Federal Housing Authority.  
 
 
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