Wednesday, January 18, 2012

Where families go after foreclosure

by Laura Williams, Center for Housing Policy

One of the most interesting questions about foreclosures is about what happens afterwards. Does the house sit vacant? Do criminals steal the copper pipes? Is the yard kept up? Does crime increase in the neighborhood? Does the home become a rental property? What happens to the family?

The Center will be hosting a webinar on that last question next week (register here!), and in advance I wanted to bring up a couple of additional studies that have tried to find out what happens to families after a foreclosure. In the first, from October of last year, Federal Reserve Board and Urban Institute researchers found that families’ credit scores are very slow to recover after a foreclosure, driven in part by other delinquent payments on cars and credit cards following the loss of their home. This problem has gotten worse in the current economic turmoil. This is not good news, as a low credit score can make it more difficult to access credit in the future, and even make securing an apartment more difficult.

But the other study, also from the Federal Reserve Board, found that while a foreclosure does raise the probability of moving, most families don’t end up in lower-quality neighborhoods or more crowded conditions. This seems like a pretty good thing. Their findings support the notion that only about half of foreclosures are actually completed, so while the owners’ credit scores take a hit, a loan modification or other work-out allows the family to stay in their home. For those who do move, most seem to end up in rental housing, but in similar neighborhoods. Only a small number move in with older adults (presumably parents) and even fewer with other families.

The study from the Urban Institute that we’ll be discussing examines how foreclosures impact children and schools. We know that unplanned moves can negatively impact education; this report takes that finding a step further to compare families’ neighborhoods and school before and after a foreclosure to assess the impact of losing a home on children.

In some ways, these three studies are all somewhat unsatisfying. We cannot know definitively what trade-offs families are making to stay in a neighborhood, make up for poor credit or to keep their children in school. That being said, all three of these are windows into the impact foreclosures are having on people and give us insight on what policies and practices can improve the current situation. At the end of the day, that’s what’s most important.

No comments: