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How Does Foreclosure Affect Children?


The national foreclosure crisis is often discussed in terms of property values, abandoned properties, and document fraud. However, there are other effects of foreclosure that are not widely discussed. One such effect is impact that foreclosure has on children. While minor children don't have credit scores to worry about, they do suffer during the foreclosure process.

In her recently released report, "The Ongoing Impact of Foreclosures on Children," Julia B. Issacs of the Brookings Institution describes children as the "invisible victims of the foreclosure crisis." She notes that court filings and foreclosure documents do not indicate the number or presence of children in a property.

In Illinois, courts are often unaware of the presence of children in a property facing foreclosure. In my experience, most judges are unaware unless the homeowner appears in court to defend the case. In many situations, the judge is informed on the day that a sheriff's sale is to be confirmed. Unless the homeowner has a valid reason to set aside the sheriff's sale, Illinois state judges are only able to extend the timeframe in which a homeowner must vacate the property -- usually by 30 days -- which only delays the inevitable.

The inevitable -- being uprooted from a home -- is what tends to affect children the most. The study estimates that there are 267,000 children in Illinois that are affected by foreclosures. It also demonstrates that children who move frequently experience negative educational outcomes. For each move in the middle of a school year, children experience a reduction in math and reading scores by one-tenth of a standard deviation. This is equivalent to spending one month out of school. The study also notes a correlation between mid-year moves and dropout rates.

The study also makes policy suggestions, suggesting that school systems could utilize programs similar to those for homeless children to allow children to remain in their original school. This added stability may help mitigate the impact on educational outcomes for children affected by foreclosure. However, the main policy suggestion is one that I have suggested on this blog more times than I can count -- incentivize loan modifications and principal reductions to keep families in homes and decrease the number of foreclosures.

Unless we find a way out of the foreclosure crisis, we probably won't muddle our way out for another 5 years at minimum. Those 5 years can be critical for our nation's children. If we want to raise a generation of well-educated, productive adults, we need to protect our children and ensure the best-possible educational outcomes for them.