'The roof is caving in'
Americans are still losing jobs & homes

By Alan Shapiro

To the Teacher

As of September 2009 the official unemployment rate for the country was 9.7% and likely to rise. But if you include in those statistics people working in part-time jobs who want full-time work and those who have given up looking for a job, the unemployment rate has already surpassed 20% in a number of states.

The first student reading below describes this situation and includes one writer's plea for a job stimulus. The second reading deals with a closely related subject--foreclosures. Many people are facing foreclosure because they've lost their jobs. This reading also describes the president's loan modification program, which has so far helped about 9% of those eligible.

Following the readings are discussion questions and suggestions for inquiry, writing, and citizenship.

See the high school section of www.teachablemoment.org for "Boom, Bust & Bailout," the most recent set of background readings on why the boom, bust & bailout.

"The recession is over." Newsweek said so on the cover of its August 3, 2009, issue. The business magazine Forbes agrees. So do economists.

"Tell me about it," say Joe and Kirsten Parente, Richard Smith, Jack Peterson, and the 6.7 million other Americans who have lost their jobs since the recession began in late 2007. Tell it to the 1.5 million jobless people will lose their unemployment insurance benefits before the end of the year if something is not done to extend them. If the recession is over, "all we have to celebrate are indications that things are getting worse more slowly." (Paul Krugman, New York Times, 8/10/09)

Joe Parente, a pipefitter, lost his job because he had a back injury that made even light lifting impossible. He needed disability benefits but failed to get them. Regulations required an MRI costing $800 to $900 he couldn't afford, and he didn't qualify for Medicaid either. His wife Kristen worked as a waitress until January, when she, too, was laid off. She didn't qualify for unemployment benefits.

For six weeks the Delaware couple and their three children, their resources diminishing daily, waited for help from the Temporary Assistance for Needy Families program. Meanwhile, the five of them moved in with Kirsten's mother and four siblings. To get by, Kirsten borrowed money from an elderly man whose house she cleaned. But tensions between Kirsten and her mother led to another move.

At last they received some cash and food stamp assistance. But to get this aid, Joe and Kirsten have to apply for 40 jobs a week - without any help to pay for gas, tolls, or babysitting. Kirsten drove 35 miles a day to attend "job readiness classes." Required to volunteer at a community agency, she chose the Association of Community Organizations for Reform Now (Acorn), a grassroots organization for low-income people. She did so well that Acorn hired her for a paying job, and she recently helped to turn out thousands of people for a Washington march to demand universal health insurance. (Barbara Ehrenreich, "A Homespun Safety Net," New York Times, 7/12/09)

Countless Americans--and they are countless, because official statistics do not include them--work part-time when they want and need to work full-time. Other countless Americans become so discouraged after losing jobs and months of failed efforts to find another that they quit looking.

"After Richard Smith, 58, was laid off from jobs at two carmakers, he moved to Charlotte, N.C., and found only part-time work. He makes $9.50 an hour repairing clubs at a Golf Galaxy Store," reports the New York Times.

After Jack Peterson, 35, was laid off his job at an auto parts store last year, he spent every day for months looking for a new one. He could not find one and gave up looking a few weeks ago.

According to the official national unemployment rate, 9.4% of Americans are out of work. But that figure excludes Smith and Peterson and many others like them. The official definition includes only those "who do not have a job, have actively looked for work in the prior four weeks, and are currently available for work."

Include all the Smiths and Petersons and more than one of every five people are out of work in Oregon, Michigan, Rhode Island, California, Tennessee, Nevada, and several other states. State call centers and websites have been overwhelmed, and hundreds of thousands of needy people wait months for unemployment checks. (New York Times, 7/24/09)

"The stimulus bill is helping somewhat," writes Times reporter David Leonhardt. "It has extended jobless benefits and prevented layoffs by state and local governments. A lot more stimulus is on the way, too….But the stimulus isn't helping as much as it could, because too much of the money is going to states that need it the least. In most of the Great Plains and Mountain West, the broad jobless rate was still below 12 percent this spring. In North Dakota, it was 7.8 percent. Yet these are some of the places receiving a disproportionate share of stimulus…."
(David Leonhardt, "Part-Time Workers Mask Unemployment Woes," New York Times, 7/15/09)

In "The Human Equation," New York Times columnist Bob Herbert wrote, "The crisis staring America in its face and threatening to bring it to its knees is unemployment. Joblessness. Why it is taking so long--seemingly forever--for our government officials to recognize the scope of this crisis and confront it directly is beyond me….The roof is caving in on struggling American families that have already seen the value of their homes and retirement accounts put to the torch.

"At the present rate, upwards of seven million homes can be expected to fall into foreclosure this year and next. Welfare rolls are rising...hundreds of thousands of unemployed workers will begin losing their jobless benefits, just about the only thing keeping them above water, by the end of summer….

"I'd like to see the president go on television and, in a dramatic demonstration of real leadership, announce a plan geared toward increasing employment that is both big and visionary--something on the scale of the Manhattan Project, or the interstate highway program or the Apollo spaceflight initiative.

"My choice would be a 'Rebuild America' campaign that would put men and women to work repairing, maintaining, designing and rebuilding the nation's infrastructure in the broadest sense--everything from roads and schools and the electrical power grid to innovative environmental initiatives and a sparkling new mass transportation network, including high speed rail systems…..

"There was a time when American could think on such a scale and get it done….It would be tragic if the 21st century turns out to be the time when that extraordinary can-do spirit disappears and we're left with nothing more meaningful and exciting than lusting after tax cuts…" (New York Times, 7/11/09)

For discussion

1. What questions do students have about the reading? How might they be answered?

2. Why don't official unemployment statistics provide an adequate account of the number of people out of work?

3. What do you know about the economic stimulus program? If you wanted to learn more, how might you find out? What appears to be a weakness in the program? What difference does that make to an unemployed person, say, in California?

4. How would Bob Herbert put many people back to work? To what extent, if any, is the stimulus program doing any of these things? If you don't know, how might you find out? What was the Manhattan Project? The Apollo initiative?

Student Reading 2:
Millions facing foreclosure

"Employers continue to shed jobs, and that makes it difficult for even people with good credit who were doing fine to keep up with their mortgage payments," says Celia Chen, an economist at Moody's, a major credit-rating organization. Losing a job is a key factor in losing a home to foreclosure. (www.realestate.yahoo.com, 7/20)

Roy Renault, 39, is a homebuilder who lost his construction job and then his own home in June as result of the economic meltdown. He, his wife Tammy, and their five boys had been living in a three-bedroom home he had helped to build. Now they're living in a cluster of tents in the Timberline Campground in Lebanon, Tennessee.

Renault said: "You get to a point where it's: Do you pay your house payment and not have lights and water and everyone sits with no clean clothes and dirty dishes and everything? Or do you keep the lights and water on and forgo the house payment for the time being? And that's the way it went, until pretty much we wound up having to leave our home."

No one knows how many people have lost their homes and been forced to live in a campground. But their numbers are growing. (www.tennessean.com, 7/12/09)

Besides losing jobs, millions of people who struggle to avoid foreclosure by making regular mortgage payments are now "underwater"--that is, they owe more, often much more, on their homes than the homes can be sold for. Many people bought their homes during the housing boom in the early years of this century at top prices. As sales of houses in an overstuffed housing market began their sharp decline in 2007, prices also fell.

Amanda Auge lost her job. And her Southern California home has lost more than half its value--dropping from $395,000 to $180,000. She says that for her and her daughter Jasmine, "Foreclosure seems like a foregone conclusion." This month she paid $600 of her usual $3,000 mortgage payment because "We want to show good faith and pay down our loan." But what she's paying down won't be enough for very long.

A 2007 Harvard study found that "at least 62% of bankruptcy debtors can trace at least part of their financial hardship to medical debt." (http://www.pnhp.org/new_bankruptcy_study/Bankruptcy-2009.pdf)

A Mortgage Bankers Association survey found that six million loans were either overdue or in foreclosure during April, May and June, the highest number the group has ever recorded. This number does not include those who have already suffered foreclosure. President Obama's $75 billion program to help people facing foreclosure has so far provided help for 235,247 people, or 9%, of those eligible for mortgage "loan modification," according to the Treasury Department.

Under Obama's program the bank agrees to a "loan modification," reducing the loan's interest rate or the amount of principal owed. Homeowners pay less money back to banks. If they pay on time for three consecutive months, their lower rate stays the same for at least five years. Since banks receive less money from borrowers, they rarely agree to principal reductions, even though they get $1,000 from the government for every loan they modify, followed by $1,000 a year for each of the next three years.

Bank of America has received $45 billion in taxpayer bailout money and last year paid hundreds of employees bonuses of $1 million, but has modified only 4% of eligible mortgages. Figures like these have contributed to popular outrage at the government for providing enormous bailouts for banks deemed "too big to fail," while letting people who are too small to count to fall through the cracks.

Big banks like Bank of America, Wells Fargo and JPMorgan Chase dominate the mortgage servicing industry. But for them, and smaller lenders, loan modification is new, takes a lot of paperwork, and may also be unprofitable. "After all, if a loan is modified, the bank has to take a write-down on the portion of the loan it is swallowing. If lots of loans are modified, that means a lot of write-downs." (Joe Nocera, "A Trip to the Woodshed for Biggest U.S. Mortgage Servicers," New York Times, 7/11/09)

But according to a New York Times report, the main reason mortgage companies are "reluctant to give strapped homeowners a break" is that these companies collect lucrative fees on delinquent loans. "Even when borrowers stop paying, mortgage companies…collect fees out of the proceeds when homes are ultimately sold in foreclosure…fees for insurance, appraisals, title searches and legal services." (Peter Goodman, "Late-Fee Profits May Trump Plan to Modify Loans," New York Times, 7/30/09)

According to the Chicago Tribune, "the biggest lenders indicate they are likely to move more aggressively to clear a backlog of troubled mortgages." And that means trouble for people like Amanda Auge and 15.4 million other homeowners who are underwater. (www.chicagotribune.com, 7/6/09)

On July 28, 2009, the U.S. government required representatives from the biggest mortgage lenders to come to Washington for a meeting. A letter to them demanded that they begin "adding more staff than previously planned, expanding call centers beyond their current size, providing an escalation path for borrowers dissatisfied with the service they have received, bolstering training of representatives, developing extra online tools, and sending out additional mailings to borrowers who may be eligible for the program." (Joe Nocera, New York Times, 7/11/09) But the results of this meeting remain to be seen.

"When will things get better?" asked Senator Jack Reed of Rhode Island. "On Main Street, the recovery will begin when foreclosures stop." What do mortgage servicers need to get that process moving? According to Joe Nocera, it will take "a good swift kick in the rear."

For discussion

1. What questions do students have about the reading? How might they be answered?

2. What connection can there be between losing a job and losing a home to foreclosure?

3. What is the president's loan modification program? How well is it working? What problems do banks have with the program? How do mortgage service companies profit from foreclosures?

4. Why does Senator Reed think "the recovery will begin when foreclosures stop"?

For inquiry

The class might want to shape an inquiry into questions students have raised in discussing the readings.

Or students might explore the following questions about their own community or neighborhood. Individuals or small groups might seek answers and report their findings to the class.

• How many people in your community or neighborhood are unemployed? What is the official unemployment rate?
  
• How many people are working part-time who want to work full-time?
  
• How many people are unemployed but have given up looking for a job?
  
• How many homes have been foreclosed? How many are facing foreclosure?
  
• What is being done to help people who are jobless and suffering from or facing foreclosure?
  
• What town or city records might provide information for answers to these questions?

For further discussion, writing, and citizenship

The words "unemployment" and "foreclosure" are abstract. Those suffering from either or both are not.

Discuss the following with students: What ground rules might they establish as they ask their families and friends about the human effects of unemployment and foreclosure? To what extent might they be willing to discuss this sensitive subject in small groups and then write about what they know? In the high school section of www.teachablemoment.org see "Teaching on Controversial Issues" and "Teaching Social Responsibility." The latter includes suggestions for active student learning on projects that promote citizenship.

This lesson was written for TeachableMoment.Org, a project of Morningside Center for Teaching Social Responsibility. We welcome your comments. Please email them to: lmcclure@morningsidecenter.org.

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