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Call 911, Foreclosures Are Up

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Higher foreclosure levels actually contribute to higher levels of violent crime.

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A few weeks ago, Countrywide Financial (CFC), the biggest U.S. mortgage lender, reported its third straight decline in quarterly profit due to increases in late loan payments and that the company has set aside $293 mln for loan losses in the quarter, more than triple the level a year earlier, blaming a loan-loss provision of $181 mln on prime home-equity loans.

Back in April, Furniture Brands International (FBN), the maker of the Broyhill and Thomasville brands, said that it would cut 330 jobs and close three North Carolina plants, due to decreased demand.

This morning, Home Depot (HD) reported FY06 net income down 15% amid a tough housing market. For the quarter ended July 29, HD posted net income of $1.59 bln, or 81 cents a share, compared with $1.86 bln, or 90 cents a share, a year earlier.

Wal-Mart (WMT) also reported 2Q $0.72 EPS versus $0.76 cons on revs of $91.99 bln versus $92.42 bln. The company also issued downside guidance for FY '08, since the soft housing market has obviously reduced demand for Wal-Mart's top seller: walls.

As has been discussed extensively on Minyanville, things are looking tough all over, as a result of the mortgage meltdown.

The number of U.S. homes facing foreclosure surged 58% in the first six months of the year, as 573,397 properties across the nation reported some sort of foreclosure activity, according to RealtyTrac Inc.

That works out to one filing for every 134 U.S. households.

James J. Saccacio, RealtyTrac's CEO said, "Based on the rate of foreclosure activity in the first half of 2007, we could easily surpass 2 mln foreclosure filings by the end of the year, which would represent a year-over-year increase of over 65%."

MV Professor and Houston fund manager Ryan Krueger told me, "I truly fear what will happen when more folks get further behind the eight-ball."

MV Executive Editor Kevin Depew took a similar, if more pointed, view, saying:

"I predict people will one day use the fiberglass carcasses of their SUVs as stackable shanty towns all along the East Coast and parts of Kentucky, Indiana and Michigan where these things are manufactured. They'll burn tires for warmth. People will rue the day they threw their balance sheets to the wind and lived like paper princes in a debt-fueled orgy of over-consumption and excess. The SUV shells, although spacious, won't have active power windows or door locks because it will be too expensive to run the batteries necessary to operate them."

Ridiculous? Maybe not. There are a number of people using modified shipping containers as homes these days:



But, it's not only the people whose homes are being foreclosed on that feel the effects.

A 2006 study called "The Impact of Single-family Mortgage Foreclosures on Neighborhood Crime" by Dan Immergluck of the City and Regional Planning Program at Georgia Tech and Geoff Smith of the Woodstock Institute in Chicago, was the "first to systematically estimate the effect of foreclosures-many of which followed from subprime loans-on neighborhood crime rates."

Using data on foreclosures, neighborhood characteristics and crime, Immergluck and Smith found that higher foreclosure levels actually do contribute to higher levels of violent crime. A standard deviation increase in the foreclosure rate (about 2.8 foreclosures for every 100 owner-occupied properties in one year) corresponds to an increase in neighborhood violent crime of approximately 6.7%.


Dan Immergluck


Geoff Smith

Paul Halvorson, executive director of Third Way Network, a neighborhood-based private non-profit in Minneapolis that helps families find affordable housing and Iweda Riddley, a Third Way staff member, say foreclosures unravel the stability of communities.

"The neighborhood deteriorates and that's when the crime level goes up because the drug dealers start hanging out on the corner," Riddley told Mineapolis Public Radio. "Families don't get involved in their neighborhood anymore and start staying indoors and they really start being secluded from everything."

April Charney, a consumer attorney for Jacksonville Area Legal Aid, told the Jacksonville Daily Record that JALA research shows a correlation among foreclosure rates and crime rates in a neighborhood.

"Look at the top ten zip codes for each and you'll see a lot of overlap," she said.

However, for those remaining in neighborhoods hit by high foreclosure rates, there is an answer: the "Safe Bedside Table" by British designer James McAdam.



The cherry table has a removable leg that acts as a club for easy bludgeoning and a top that acts as a defensive shield. McAdam says it can be dismantled and put to use against intruders in about three seconds.

Or, if hand-to-hand combat isn't your thing, you might try Alexander Reh's "Fully Loaded" chair:



With over 450 12-gauge shotgun shells providing both comfort and easy access to plenty of ammo, you-and your family-can rest easy no matter what the mortgage market is doing.

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