Recent increases in delinquencies and foreclosures in the subprime mortgage market have raised widespread concerns about the possibility of accelerating foreclosures throughout this year and next. While lenders, banks, and securities traders scramble to figure out how to insure themselves from the market consequences of rising subprime mortgage defaults, local communities are struggling to stem the tide of foreclosures that impose significant costs on families, neighborhoods and cities. This report analyzes the subprime foreclosure phenomenon at the local level, describes the high spillover costs of foreclosures, and argues that foreclosure prevention is cost-effective.

• Subprime foreclosures are expected to increase in 2007 and 2008 as 1.8 million hybrid ARMS—many of which were sold to borrowers who can not afford them—reset in a weakening housing market environment.

• Varying local economies, housing markets and state regulatory regimes mean that some local areas are getting hit by the subprime foreclosure crisis much harder than others and deserve immediate attention.

• It pays to prevent foreclosures in these high-risk cities – every new home foreclosure can cost stakeholders up to $80,000, when you add up the costs to homeowners, loan servicers, lenders, neighbors, and local governments.

• Policy responses to the subprime crisis should be designed to address the local foreclosure phenomenon and include both foreclosure prevention strategies and improved mortgage lending regulations.

For the full text of this report, please click on the file listed under "Related Resources."

The U.S. labor market is a constantly churning sea of job creation and destruction. On average, 18 million new jobs appear each year, while 15 million jobs are lost.1 The vitality of the labor market creates great opportunities for those who can navigate it successfully, but it also creates great risk and uncertainty for working families.

One result of a constantly changing labor market is that many American families experience substantial year-to-year instability in their earnings. While there is an ongoing debate whether that volatility has increased significantly in recent years, there is no question that it exists. About one in five workers experiences a decline in earnings of at least 25 percent from one year to the next, while one in nine workers sees a decline of 50 percent of more.

Some of the volatility in earnings reflects family decisions to change jobs or to take time off from work to devote more time to family responsibilities. It also reflects involuntary loss of earnings as a consequence of illness or injury. Some of the volatility, however, is the outcome of the shifting job market as workers are displaced by slack demand, technological change, or competition from foreign producers.

Elements of the social safety net can help cushion the impact of a temporary decline in earnings because of a job loss, but there are few government programs to help those who suffer a permanent reduction in earnings. Unemployment Insurance (UI) is the main bulwark against temporary job loss, but the UI program has many gaps and is not designed to help with long-term job displacement or reduced earnings once a worker is reemployed. Programs explicitly designed to help displaced workers such as Trade Adjustment Assistance (TAA) are limited in scope and reach very few workers.

The federal income tax provides some assistance to families who experience a decline in earnings through the Earned Income Tax Credit (EITC), but that help is limited to those families whose earnings are low enough to qualify for the credit. Moreover, the EITC itself and other features of the tax system can exacerbate the consequences of earnings fluctuations by imposing higher taxes on families whose income fluctuates from year-to-year than on families with the same average earnings but whose earnings remain steady.

Parents today know that their children will need a college education to succeed in our global economy, but they are having a harder time saving for college as tuition skyrockets. Despite the importance of a college education to an individual’s future success and the competitiveness of the entire economy, steep tuition increases have made college an intimidating financial hurdle for middle class families. America’s parents need support to be able to provide their children with the opportunities and access to education that they had. Only with this support will today’s young people achieve prosperity in a changing global economy.

Key Facts

·        College is Key for Opportunity in 21st Century Economy.

·        The Cost of College Keeps Going Up.

·        Students and their Families Are Racking Up Student Loan Debt.

·        Even Families that Do Save For College, Can’t Save Enough.

·        On Top of Tuition, Textbooks Create a Burden On College Students and Their Families.

The rising costs of childcare, healthcare, and education, coupled with stagnating wages, have made raising a child a financial high wire act for many American families. Unfortunately, much of the Bush tax cuts were designed to provide benefits to the people who don’t need them, while middle-class families struggle to manage the expenses of raising a family — expenses which only increase with each new child. Targeted tax relief to middle-class families will help them to mange the crunch of balancing work and family, achieve their aspirations, and contribute to America’s economic growth.

Key Facts

·        Families Are Sacrificing More to Have Children.

·        More Young Adults are Waiting Longer to Have Children.

·        It Often Takes Two Incomes to Raise a Family.

·        Child Care Can Pose a Huge Financial Burden on Families.

·        Millions of Americans Are Struggling to Manage the Financial Crunch in Balancing Work and Family.