Predicted by economic experts nearly a decade before it destroyed millions of lives in the U.S., the collapse of the housing market in 2006-2007 resulted in widespread homeowner hardship that remains an ongoing issue today. As the result of financial institutions knowingly giving out high-risks loans to home buyers, foreclosure rates reached unbelievable numbers between 2008 and 2012. In 2003, then Congressman Ron Paul warned members of the House Financial Services Committee that the housing price boom fueled by subprime lending could not last forever. “When property prices start falling”, Paul said, “homeowners will face financial difficulty as equity will be erased”.
Unfortunately, Congressman Paul was right, along with many other predictors of the impending housing crisis.
The Origins of the Housing Crisis–Why Did It Occur?
The world in the early 2000s enjoyed excess capital, partly supported by the surge in .com businesses. Only a very few could not imagine there would be a global recession within a few years, especially investment managers who only had one thing on their minds–where to invest funds to make a profit as quickly as possible. (Read more about the securitization of mortgages here).
What Caused the San Antonio, TX Housing Bubble to Burst?
Prospective home buyers received broker-backed mortgage loans. Brokers then sold these mortgages to banks. Banks, in turn, sold these mortgages to Wall Street investment agencies. Wall Street investors thus received copious monthly mortgage checks from home owners. However, these checks were meant only to continue until the mortgage was paid off. During this time, firms sold shares of that monthly income to other investors who were more than eager to purchase these shares.
It was a more-than-perfect solution to the wildly huge demand of assets at that time. As seemingly safe investments, these mortgages, backed by ample down payments from unsuspecting home owners, provided steady income for money-hungry U.S. and global investors–for a short while.
Demand for Mortgage-Back Securities Leads to the Housing Meltdown
Investors loved receiving those monthly mortgage checks so much that they changed mortgage qualification guidelines to include anyone who simply stated they had income and some money in the bank. (SIVA loans).
SIVA loans were quickly followed by NIVA loans, or no income verified assets mortgage loans. Lenders no longer cared about your employment status. They only cared about existing bank accounts that showed you had money in the bank.
However, NIVA loans didn’t address the demand for more and more mortgage checks by global investors. So qualification guidelines relaxed even more to create more securities and, most importantly to investors, more mortgages. Since banks didn’t retain these subprime mortgages, they didn’t really care who they approved for a mortgage loan. They figured if borrowers couldn’t pay them back, Wall Street firms would step in and pay them.
Stagnant Income + Rising Home Prices = the Housing Crisis
When people with high risk loans began defaulting on their mortgage payments, the number of for-sale homes increased exponentially. House values plunged dramatically in the fall of 2006 and bottomed out in 2007-2008. In a panic, Wall Street investment firms abruptly stopped buying subprime mortgages. Banks did attempt to work with home owners facing foreclosure but the complicated way mortgages had been sold, resold and amassed into securities made it difficult to pin down who actually owned these mortgages.
Fast Forward to 2016
Although the worst of the housing crisis is behind us, homeowners are still experiencing repercussions of the subprime market debacle. Fortunately, many federal, state and local resources now exist to help homeowners avoid foreclosure and ease other financial problems arising from the corrupt practices of banks, Wall Street and shady mortgage lenders.
Resources for San Antonio Homeowners Facing Hardship
5 Foreclosure Resources
- Federal Reserve Consumer Info
- Office of the Comptroller of the Currency (U.S. Dept. of the Treasury)
- Federal Reserve Board
5 Credit Repair and Counseling Resources
- Credit Counseling Organizations (IRS)
- Justice.gov/Credit Counseling
- National Foundation for Credit Counseling®
- Consumer Credit Counseling Services
- Graceworks Debt Counseling
5 Resources for Help with San Antonio Property Tax Issues
- Real Estate Tax Center (IRS)
- Veterans United Network
- Property Tax Exemptions/Assistance
- Consumer Financial Protection Bureau
- State Government Websites
5 Resources for Help Paying San Antonio Utilities
- State-by-State Utility Payment Assistance Resources
- Salvation Army
- U.S. Energy Information Administration
- Weatherization for Homes/State-by-State
5 San Antonio Housing Authority Resources
- Affordable Housing.gov
- Rental Assistance/U.S. Department of Housing
- National Coalition for the Homeless
- Government Housing Programs by State
- Housing Assistance/USDA
5 Resources Providing Child Support Assistance
- Office of Child Support Enforcement/U.S. Dept. of Health and Human Services
- State-by-State Child Support Websites
- How to Start Getting Child Support
- International Child Support Help
- Federal Laws on Child Support Enforcement
Resources for San Antonio Rental Subsidies/Section 8 Housing
- Housing Choice Vouchers
- HUD State Information
- Rental Assistance
- HUD Programs (2016)
- Section 8 Housing FAQs
Help with Finding Employment In San Antonio
- USA.gov/Find a Job
- U.S. Department of Labor
- State Job Banks
- U.S. Job Finder Tool
- State Workforce Development Boards