We’re now in the sixth year of the economic collapse and the home foreclosure crisis persists. It continues to drag down families, destroy wealth, weaken communities and prevent economic recovery. Inadequate government response has led to a long-term economic crisis that could have been avoided. With good policy, more losses can still be avoided and the economy can begin a real recovery. According to a 2010 report by the Center for Responsible Lending, 2.5 million homes completed the foreclosure process between 2007 and 2010. The 2011 report by the Center for Responsible Lending found that the country was not even halfway through the foreclosure crisis. In total, the Federal Reserve estimates that $7 trillion in home equity was lost from American households between 2006 and 2011 due to the housing crisis.

The crisis of foreclosure and lost wealth is not over. Every three months, 250,000 new families enter the foreclosure process. According to a May 2013 report of the Congressional Budget Office (CBO), more than 13 million homes are still underwater, which increases the risk of foreclosure.

This crisis could have been averted through government policy that placed the needs of people, rather than those of the bankers, first. Because that hasn’t happened yet, people are coming together and demanding that the Department of Justice (DOJ) start holding the big banks accountable. The Home Defenders League, a coalition of local groups that are fighting foreclosure, held a series of actions at the DOJ last week.

In this article, we describe what individuals can do to protect themselves and what local and federal governments can do to resolve the foreclosure crisis and place the nation on a path of economic recovery for everyone, not just for the wealthy.

The Foreclosure Crisis and Fake Recovery Hurt Everyone

Homes are the most valuable asset of American workers. Each foreclosure results in an average of $131,200 in lost wealth for the homeowner. In 2012, a total of $192.6 billion in wealth was lost due to foreclosures across the United States. For each of the nation’s 113.7 million households, that equals an average of $1,679 in lost wealth. If the 13 million homes still at risk are foreclosed, another $221 billion in wealth will be destroyed, according to a report by the Home Defenders League released on May 20, 2013, “Wasted Wealth: How the Wall Street Crash Continues to Stall Economic Recovery and Deepen Racial Inequity in America.”

Foreclosures do not only destroy the wealth of the families who lost their homes; they also drag down neighbors and communities. A report, “The Municipal Cost of Foreclosures,” shows that foreclosures can result in as much as an additional $220,000 in reduced property value and home equity for nearby homes. In addition, foreclosure can add costs to local governments. One foreclosure can impose up to $34,000 in direct costs on local government agencies, including inspections, court actions, police and fire department time, potential demolition, unpaid water and sewage, and trash removal. Foreclosures in Newark, New Jersey, have cost the city, and taxpayers, $56 million, according to a report by New Jersey Communities United.

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