Foreclosure Crisis Hits Warp Speed: 6 Million Families Face Losing Their Homes in the Next Three Years

What would you do if someone foreclosed on your home? If suddenly you and all your possessions were out on the street with a bank account depleted from trying to make mammoth mortgage payments, where would you go?

An estimated 6 million families could be facing this question in the next three years, with nearly 1 in 10 mortgage holders either delinquent or in foreclosure. And although we've heard a lot about trying to help people stay in their homes -- like President Obama's $275 billion foreclosure-prevention package -- it's been far more difficult to follow what happens to these families once they've been forced out.

"We haven't done a good job of tracking those people who were not able to stay in their homes," admits Douglas Robinson of NeighborWorks, an umbrella organization for more than 230 local nonprofits focused on community development. "Over the past four years, we've been heavily focused on foreclosure prevention -- keeping people in their homes. We're just starting to look at the other side of things now."

According to Robinson, those victims of foreclosure who do wind up being pushed out of their homes can be roughly divided into two waves.

The first wave consists of those who lost their homes because they were unable to keep up with payments on poor mortgages, often with cripplingly high interest rates. There's no hard research as yet, but anecdotal evidence indicates that, although these people didn't have the financial resources to keep up with their mortgage payments, most were able to rent apartments or even homes in their same communities.

But for the second wave, the transition hasn't been nearly so seamless. These are the people who are unable to make mortgage payments because they've lost their jobs. They no longer have the incomes to afford rentals.

This second wave is creating a strong demand for social services, including homeless shelters -- a demand that far exceeds supply. Again, as yet there is no hard data, but anecdotal evidence indicates a far higher percentage of these people are winding up in hotel rooms, with friends and relatives, in shelters, or even sleeping in cars or on the street.

The recession has created a new and growing segment of the homeless population --those who until recently were gainfully employed, often living paycheck to paycheck, and now find themselves out of a home through no fault of their own.

A recent report from the National Center on Family Homelessness estimates that 1 in every 50 American children was homeless between 2005 and 2006, about 1.5 million kids. And the numbers are likely to get worse as the economy continues to decline.

"Our main effort has been to keep people in their homes, and that's where the bulk of our money and resources has gone," explains Robinson. "But it is important, from a public policy standpoint, to know just what's happening to those people who can't stay."

There is federal aid pending for foreclosure victims, but for many it will be too little too late. The stimulus package pledges money to help potential renters with rent and security deposits.

In addition, President Obama's proposed foreclosure package promises assistance to those still in danger of losing their homes. But the money isn't available yet, and when it is, it will still leave plenty of the financially struggling high and dry.

For example, the Obama plan allows homeowners to obtain new, lower interest loans up to 105 percent of what their homes are worth, but that's not enough for the numerous homeowners who are underwater in their homes (meaning they owe more in loans than the property is worth).

The plan will also pay cash and fees to mortgage companies to encourage them to modify homeowners' loans so their payments are no more than 31 percent of their incomes. But even then, homeowners have to make steep payments, an impossibility for many in a nation boasting 8.1 percent unemployment rate, with rates leaping up to 12 and 14 percent in some major cities.