The financial woes spurred by predatory lending culminated in a resolution passed by the Seattle City Council last week.
On Oct. 29 the Council issued a plea to Washington, asking that the Federal Reserve take a stand against subprime mortgages. The resolution was co-written by the Association of Community Organizations for Reform Now (ACORN), an advocacy group that focuses on social justice issues.
ACORN brought forth the resolution in conjunction with their release of a new study on home foreclosures earlier that week. The study paints a dire picture of the home loan market, predicting that up to two million families will face foreclosure due to impossibly high loan rates.
In Seattle, ACORN calculated that 2,297 high-cost loans made in 2006 will go into foreclosure sometime in the future. The defaulting loans will create a net loss of $385 million, including $17 million of debt for individual homeowners in foreclosure and $118 million in decreased property values for neighbors of the soon-to-be vacant homes.
An independent report issued by the U.S. Congress's Joint Economic Committee this fall made an equally bleak assessment of the situation. Of the 7.4 million standing subprime loans in the country, nearly one-fifth will end in foreclosure in the next two years, the report said. The $71 billion of loss accompanying these foreclosures included $1.4 billion for homeowners in Washington State.
The City Council took these numbers into account when issuing their resolution, unanimously urging the Federal Reserve to outlaw deceitful marketing schemes aimed at uneducated homebuyers, and asked that adjustable rate mortgages be severely curtailed.