When the recession first hit three years ago, the majority of foreclosures and bankruptcies fell on those who had overextended their finances by buying above their means and developers who over-invested their resources. Now, the burden has fallen on the middle class.
At first, most middle-class Americans were able to pay their mortgages by cutting back on unnecessary expenses and draining their savings accounts. However, after a while, those resources began to run out, and many middle-class Americans started to suffer employment troubles in the form of income cutbacks and layoffs. All of these factors have left these citizens suffering mortgage default and foreclosures. Now, the national unemployment rate is holding around nine percent, with various states suffering more than others.
The Unemployment Wave
The second wave of foreclosures is being felt mostly by those in the middle-class. Also referred to as the “unemployment wave,” these troubles are chiefly caused by a lack of income. In fact, the unemployment problems have risen so far that seven or eight out of every 100 Americans are currently unemployed. For those who have suffered pay cuts or lost their jobs or businesses, and have not yet defaulted on a mortgage, the goal at the moment is to hang on as long as possible.
The federal government is making every effort possible at the moment to help these struggling homeowners. In July, the Obama Administration launched their Emergency Homeowner’s Loan Program (EHLP), which is designed to provide mortgage relief to homeowners in risk of foreclosure due to underemployment or unemployment.