In addition to foreclosures, other factors are driving families to the edge of homelessness: mounting utility bills, the surge in gas prices and the rise in unemployment, which jumped from 5% to 5.5% in May, the government reported. Often, those factors make it harder for families to afford their mortgages — especially for those who bought homes with adjustable-rate mortgages that have reset to higher rates.
Foreclosures have been spreading to prime loans, the kind made to those with good credit. About 2.3% of prime loans were 60 days or more past due in April, the highest level in at least a decade, according to data issued by First American CoreLogic LoanPerformance. That's up from about 1.4% a year ago.
"There are people coming home from work, and their houses are boarded up," says Jean Beil, senior vice president for programs and services at Catholic Charities USA in Alexandria, Va. "They're working poor, middle class. Many were surprised when mortgages increased, and they couldn't pay it."
Homeless coalition and advocacy groups have called for steps to help ease the problem. Proposals include state laws requiring home foreclosures to be entered into courthouse records within 30 days of a foreclosure sale, which would help renters determine the status of properties. Another idea would require homeowners to provide potential tenants with information about a home, such as whether it's under foreclosure.
In addition, groups such as the National Coalition for the Homeless want all federally insured mortgages to protect tenants in case of foreclosure by allowing them to maintain their lease until it expires. In many cases, tenants who live in properties that are foreclosed upon may have little time before being forced to move out. They may also lose any security deposits they had put down.
Some advocacy groups also favor more federal oversight of the financial services industry. States have jurisdiction over non-bank mortgage lenders; the National Coalition for the Homeless argues that this system creates inconsistent regulatory standards.
In the meantime, the effects of foreclosures and homelessness are seeping into public school systems that are now serving more children without permanent addresses. An estimated 2 million children will be directly affected by the subprime mortgage crisis as their families lose their homes to foreclosures, according to First Focus, a bipartisan children's advocacy group that issued the report. The April 2008 report indicates that foreclosures often result in disruptions to a child's education.
Losing one's home and having nowhere to go can also leave former homeowners emotionally wounded, seized by a sense of failure and shame. Others struggle to hold onto their pride and a fierce desire to avoid the help of charities or government services.
Sandra Wright, 37, and her three children and three grandchildren have lived in a rental home for about a year in Gary, Ind. The home has been foreclosed on, and she has until Friday to move out.
Wright, a housekeeper at a hotel, was worried that she'd wind up in a homeless shelter. But she's hopeful of finding another rental in time because the lender on the home is offering her $1,000 if she leaves the house by Friday.
"I was worried I'll wind up in a shelter," Wright says. "They could come and put everything out on the streets. I've been praying a lot. All you can do is pray."