After the 2008 crash Americans have lost $17 trillions in household wealth, including more than £6 trillions in homeowner equity. In addition, communities across the country are facing devastating cuts to essential services as state and local governments struggle to fix budget deficits.
Nearly 12 million families have either lost their homes to foreclosure alreadyor are currently in the process of foreclosure, and another 14 million are ‘under-water’ on their mortgage, i.e. they are in negative equity. On a smaller scale the UK suffers from very similar problems, but the difference between the two countries is that the US has spawned a whole series of community fightback movements which are being effective in protecting citizens and getting revenge on the banks.
The resistance movements are trying to prevent evictions by occupying homes and increasingly looking to use local legislation to write down underwater mortgages to current market values so that people can make significant savings in their mortgage payments and thus stay in their own homes. Nor is this just about social justice.
The overhang of underwater mortgage debt is now one of the primary drags on the US economy and a key cause of the jobs crisis. Altogether 14 million families across the US owe $1.1 trillion more on their mortgages than their homes are currently worth. Once their homes are reset to fair market value, it provides enough savings to underwater homeowners to pump, via their ability then to spend more, an extra near-$100bn into the national economy, creating another 14 million jobs.
Because the investors who own the underwater mortgages and the banks that service these loans are either unwilling or unable to write down these mortgages on their own, cities are now taking matters in their own hands by seizing the underlying mortgage notes on these homes. They are then using the power of ‘eminent domain’ to force banks to take a ‘haircut’ (i.e. absorb losses) on these underwater mortgages, and thus offering the homeowner a new loan with a reducred principal and interest rate.
Nor is this a novel or unusual procedure: it has already been used by cities regularly to seize homes to make way for other public infrastructure – roads, stadiums, industrial redevelopment, or whatever.
In addition cities, counties and union pension funds have begun recouping the money they lost when 16 of the world’s largest banks illegally manipulated the Libor interest rate. Public employee unions are demanding that cities stop doing business with banks that have broken the law and stolen money from taxpayers in the course of contract bargaining. They are drawing together class actions to sue the banks for their losses they imposed from market-rigging.
This kind of activist fightback needs to be instigated in the UK. The legal formats and procedures are not exactly the same in the UK, but the Occupy Movement and a host of other campaigning groups in the US are pioneering a path of resistance which we badly need to see imitated in the UK.
