News / Economy

Analysts: Foreclosure Mess Hurts US, Global Economy

WASHINGTON — The U.S. housing sector usually leads the rest of the economy out of recession.  But that is happening much more slowly than usual in the wake of the latest downturn.  That is because the housing industry is burdened by a huge number of bad loans that have caused a financial, bureaucratic, and economic mess. Problems in the U.S. housing sector are slowing the economic recovery in the world's largest economy, and elsewhere.

Deborah Harris faces possible eviction from the home she has owned for the past 17 years, after failing to make some of her mortgage payments.

Harris was a paramedic with Washington's fire department.

"Here you are about to lose your home.  It's nowhere else to go.  I don't have any husband, I don't have any children.  I've worked 23 years in the Fire Department, saving lives, keeping people alive, and here I am retired, and I don’t have a place to stay. Come on.  I mean, that's ridiculous," Harris said.

Harris won awards and promotions for her service on an ambulance, but stopped working after she was hurt carrying a large patient.  

It took many months of doctor's exams and filing paperwork to convince officials she was entitled to a pension. During that period without pay, she fell behind on her mortgage.  

The financial crisis that started in 2007 brought rising unemployment, falling home values and surging foreclossures.  

Foreclosure specialty firm RealtyTrac says foreclosures soared to more than one million a year at the peak of the crisis, from about 200,000 in an average year.

A slightly better economy has cut the foreclosure rate, but it will probably still hit about 700,000 this year.  

The chief economist from the National Association of Realtors, Lawrence Yun, says the flood of foreclosures hurts the U.S. economy, which cuts demand for products from other nations and slows global growth.    

"Foreclosure is the predominant reason for why the housing market is taking a long time to recover," Yun said. "Historically, the housing market always leads the economy, so when housing market goes down, the economy goes into a recession.   When (the) housing market recovers, economy comes out of recession."

Harris says falling into foreclosure has been a nightmare. "If it had not been for God to help me, I know I could have just gotten a stroke and died, because it was just so devastating, knowing, I didn't know when they were going to come and try to get me out of here," she said.

Harris is just one of 4.3 million people who have gone all the way through the foreclosure process since the beginning of the financial crisis.  But with help from a community group and a lawyer, she is fighting the foreclosure in court.

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