Have Foreclosures Impacted 8 Million Children?

A new report says more than 8 million children have been impacted by foreclosures since 2007. It’s a big number and unfortunately it understates the case.

The study by First Focus and the Brookings Institution says one child in ten has been impacted by the mortgage meltdown.

“An estimated 2.3 million children in single-family homes have already lost their homes to foreclosure,” according to the new study, The Ongoing Impact of Foreclosures on Children.

The report also says three million children are at serious risk of losing their homes in the future and that anther three million children have been evicted, or may face eviction, as a result of rental properties that have been foreclosed.

There’s no doubt that 8 million is a big number and that millions of children impacted by foreclosure should certainly be a matter of concern. That said, it’s likely that the report underestimates the social impact of foreclosure.

Short Sales

To understand why take a look at the report. It does not include short sales, in fact the term “short sale” does not appear in the document.

A short sale is not a foreclosure. There is no auction at the courthouse steps. It’s entirely possible that the owner of a short sale has never received a foreclosure filing.

Nevertheless, the property is distressed. The owner wants to sell the property for less than the remaining mortgage balance. A purchaser wants to buy the property at discount. Both buyer and seller get together and jointly ask the lender to allow a short sale, meaning they want the lender to allow the sale of the property without repaying the entire debt at closing.

Lenders want their money back and as a result will only approve short sales after making sure the property cannot command a higher price and that somehow the seller cannot do more to offset the loss.


While a short sale does not have the stigma of a foreclosure it can surely result in the loss of a home and a change of address. The trouble is that when children move they often change schools and the mere act of change — by itself — can be disruptive.

The new report is important because it points to one way in which the social contract is being broken. Unfortunately the real damage created by the mortgage meltdown is even larger than the report suggests, a burden which many in the next generation will carry.

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