The National Mortgage Settlement has been finalized and the $2.5 billion dollar bank payout is being allocated among the 49 participating states. But among those states that were hardest hit by the foreclosure crisis, only Georgia has no plans to allocate any of their $99 million dollar share of the settlement to help homeowners who are struggling to avoid foreclosure.
In spite of being ranked in the top ten states for foreclosure activity for several years, and currently ranked at number 5, Georgia plans to use it’s mortgage settlement funds as grant money to help attract new business to the state, in hopes of creating new jobs.
Andy Schneggenburger, Executive Director of the Atlanta Housing Association of Neighborhood-based Developers says that Governor Nathan Deal’s decision to ignore the ongoing foreclosure crisis shows the extent to which the Governor and others in the state legislature have failed to comprehend the depths of the foreclosure problem. Indeed, over the past few years, even non-profit affordable housing organizations have faced foreclosure due to a lack of funding to complete affordable housing projects.
Back in February of this year, when the settlement was announced, Georgia Attorney General Sam Olens gave an interview to WSB Radio in Atlanta, in which it appeared that help would soon be forthcoming for many Georgia homeowners who may have been wrongfully foreclosed on, or were struggling to avoid foreclosure. But under the terms of the settlement, the AG has no direct authority to allocate those funds. That’s been retained by the Governor and the state legislature. They’ve decided to redirect those funds for other purposes.
As of this writing, I’ve seen nothing to indicate that Georgia will even allocate adequate funds from the settlement to help the Attorney General’s office investigate and prosecute mortgage fraud, even though this played a big part in the housing crash which took much of Georgia’s job market with it. Mortgage fraud and the real estate crash are the reason for most of Georgia’s current unemployment and budget woes.
Georgia suffered a severe unemployment spike as the housing market melted down. Lost jobs mean more foreclosures, and more foreclosures mean more lost jobs in supporting industries that are already in the state.
Thousands of businesses and other entities depend on the housing market for all or part of their income. This includes manufacturing, retail and wholesale business, governments and schools. Much of our economy is tied to houses, the things that go in them, the taxes we pay to own them, the money we spend insuring them, and the mortgage interest that investors earn when we pay for them.
Heavily dependent on new construction and renovation of homes for jobs, Georgia has seen much of the housing related job base erased by foreclosures, stalled building projects and builder failures. It is number-one in the nation for bank failures related directly to failed real estate projects and excessive mortgage fraud.
With unemployment officially near 12% in 2010, it is still at 8.9%, a very high rate for a sun-belt state that has historically enjoyed solid employment growth. Much of the reduction in Georgia’s “official” unemployment has come from the expiration of long term unemployment benefits. Recently Georgia reduced the term for collecting unemployment from 29 weeks to only 14. (I suppose this means that the unemployment numbers will improve drastically in about 12 weeks…)
In spite of the temptation to use the funds to lure new business to the state, the fact remains that new technology is allowing businesses to hire fewer workers than ever before. Even the new one million square foot Caterpillar manufacturing facility, to be constructed near Athens between March 2012 and March of 2013 will only create about 500 construction jobs for a period of one year.
The facility expects to employ 1,400 Georgians when it is completed next year. Meanwhile, Georgia has moved from 8th to 5th on the list of top ten foreclosure states, and expects more than 120,000 new foreclosures to be filed in 2012. In addition, according to the Case-Schiller home price index, metro Atlanta, GA, tops the list of metro areas in terms of property value lost over the past year, and has been in the top ten since 2008.
While the employment needs of the state are severe, most of the jobs lost were in sectors directly related to the housing industry. This includes local government’s and schools, where falling property tax revenues have led to thousands of job losses and service cuts. The business of providing or renovating housing is one big revenue generating machine that impacts a large percentage of Georgia’s retail, wholesale and manufacturing sectors. A vibrant housing industry would also make more businesses want to relocate here.
It’s difficult to put a price on the impact of foreclosures. But everyone agrees that the impact has been very widespread in Georgia. Virtually every residential property in the state has been reduced in value to some extent, with most single family homes losing anywhere from 25% to 50% of their original value. Lost property tax revenue has reduced local government budgets and forced cuts in services and jobs. Businesses related to the housing industry such as furniture and carpets are struggling to stay afloat. Homeowners watch helplessly as their home equity is wiped out by falling home prices caused by high foreclosure rates.
At some point it’s arguably a better investment to reduce foreclosures and slow the loss of property values, as those losses are growing at a much faster pace. And many new jobs created in the midst of a crippled housing market are likely to be displaced by more losses of existing jobs. The housing market is an integral part of today’s consumer economy in Georgia. Saving housing IS a major investment in job retention and job growth.
Donna S. Robinson is a 16 year veteran of the Real Estate Industry, and a lifelong resident of Georgia. Donna offers coaching and consulting services to real estate investors and investment companies. Her website is RealtyBizConsulting.com