Get Sick, Get Out: The Medical Causes of Home Mortgage Foreclosures
By Christopher Tarver Robertson, Richard Egelhof, & Michael Hoke
Vol. 18:65 2008
In recent years, there has been national alarm about the rising rate of home foreclosures, which now strike one in every 92 households in America, and which contribute to even broader macroeconomic effects.
These factors — loose lending, irresponsible borrowers, a flat real estate market, and rising interest rates — have together become the “standard account” of home foreclosure.
Policymakers and scholars may be surprised to learn that even in the midst of this spike, one of the largest causes of home foreclosures was none of the above. We studied homeowners going through foreclosure in four states and found that medical crises contribute to half of all home foreclosure filings. If these patterns hold nationwide, medical causes may put as many as 1.5 million Americans in jeopardy of losing their homes each year.
Half of all respondents (49%) indicated that their foreclosure was caused in part by a medical problem, including illness or injuries (32%), unmanageable medical bills (23%), lost work due to a medical problem (27%), or caring for sick family members (14%). We also examined objective indicia of medical disruptions in the previous two years, including those respondents paying more than $2,000 of medical bills out of pocket (37%), those losing two or more weeks of work because of injury or illness (30%), those currently disabled and unable to work (8%), and those who used their home equity to pay medical bills (13%). Altogether, we found that about 7 in 10 of our respondents either self-reported a medical cause of foreclosure, or experienced one of these indicia of medical disruptions in the years before foreclosure.
Altogether, these findings suggest that the standard account of mortgage foreclosure is missing a large portion of the story. Mortgage foreclosures are not just the results of bad loans, bad properties, or bad borrowers. Instead, many mortgage foreclosures are the result of unpredictable medical disruptions that impact both the incomes and the expenses of family finances.
The authors of this study indicate that the results are only preliminary, primarily due to limitations in methodology. Although we cannot quantify precisely the extent of the problem, the qualitative conclusion is certainly valid. Just as with personal bankruptcy, medical debt in both insured and uninsured individuals contributes to loss of homes through mortgage foreclosures.
This past month has demonstrated to all of us the importance, for our entire economy, of establishing policies that would ensure that default of home mortgages would be a relatively rare event. Eliminating medical debt certainly would not prevent all home loan defaults, but it would prevent a great many of them, even if we cannot yet precisely quantify how many.
Simply changing to a more efficient, single payer national health program would be one of the least expensive measures that we could undertake to help reduce home mortgage foreclosures.
Almost everyone would like to see measures that would reduce the negative impact of our financial crisis that was precipitated by mortgage-bcked securities. Some of us also would like to see that everyone has affordable access to health care, even if it is only an additional benefit of a financial rescue package.