BOSTON - Bank crashes in Iceland,

an International Monetary Fund (IMF) bailout of Ukraine and volatile

stock markets the world over -- it all links back to the U.S.

communities where hundreds of thousands of families are losing their

homes with no let up in sight, those on the frontlines say.

'Foreclosure has been a

huge issue, a ballooning, mushrooming issue for at least two years.

We've been inundated with phone calls for help,' said Tracy Garrett, a

housing advocate with Community Action House, a non-profit in Michigan.

Recent

reports point to a global economy that is tumbling downward. On Sunday,

Ukraine negotiated a 16.5-billion-dollar bailout from the IMF, and

Hungary is next in line for help. On Monday, more U.S. banks lined up

for a slice of a 125-billion-dollar handout from the government, while

the U.S. stock market slid further.

Many experts and advocates

agree that foreclosures are at the root of the global financial mess,

but so far Congress and the George W. Bush administration have focused

attention and dollars on banks and Wall Street.

'If the

foreclosures of these past four years can drive the U.S. economy to the

brink of a depression, what can we expect from a dramatic increase in

those numbers?' said John Taylor, president of the National Community

Reinvestment Coalition, an organisation of housing advocates.

Today, foreclosures are happening at an alarming rate.

Data

released last week from RealtyTrac shows that foreclosures during July,

August and September of this year rose 71 percent over the same time

last year. In those three months, 765,558 U.S. households were in

foreclosure or in trouble with their banks, according to RealtyTrac,

which compiles home sale data.

U.S. officials estimate that 2.5 million more households will face foreclosure in the next 12 months.

Many

of the foreclosures are the result of questionable loan terms, made by

financial institutions at a time when housing prices were rising and

interest rates were low. These sub-prime mortgages were made into

investments by the financial institutions and traded as highly risky

packages around the globe. Millions of families are now proving unable

to meet the mortgage terms and are defaulting on their loans, and the

value of the houses has plummeted to far below what they paid for them.

Banks

and financial institutions worldwide own the credit default swaps and

other unregulated investments that were fashioned from the mortgages,

and are unable to sell them due to fear on the market that they are

worthless.

Former Treasury Secretary Alan Greenspan has faced

criticism for embracing an extreme free-market ideology that allowed

the mortgage and financial industries to lead the world into a global

financial mess.

Speaking to a Congressional panel last week,

Greenspan took no responsibility for the crisis and instead reported

his observations of what has happened and what is likely to happen.

Sub-prime

mortgage loans were 'undeniably the original source of the crisis,'

Greenspan said. 'Given the financial damage to date, I cannot see how

we can avoid a significant rise in layoffs and unemployment.'

'A necessary condition for this crisis to end is a stabilisation of home prices in the U.S.,' he said.

The

government has some programmes in place to assist struggling

homeowners, including a 350-billion-dollar plan that got underway Oct.

1, which has strict eligibility requirements. So far the Bush

administration has encouraged, but not required banks to re-negotiate

unfair mortgages with homeowners, even banks that have received

billions of dollars through a 700-billion-dollar Wall Street bailout

programme approved by Congress.

'We expect all participating

banks to continue to strengthen their efforts to help struggling

homeowners who can afford their homes [to] avoid foreclosure.

Foreclosures not only hurt the families who lose their homes, they hurt

neighborhoods, communities and our economy as a whole,' said Treasury

Secretary Henry Paulson on Oct. 20.

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Sheila Bair, a top

administration official as the chair of the Federal Deposit Insurance

Corporation, told a Senate panel last week that the government should

do more to help homeowners.

'Some of the voluntary efforts have helped but we are falling badly behind,' Bair said.

Some

interpreted her comments to mean that the Bush administration will soon

put forth a plan to further encourage or mandate that banks modify

loans for struggling homeowners, something Taylor and other housing

advocates have recommended.

'Assisting homeowners to stay in

their homes would have been a more effective and equitable way to

prevent the collapse of financial institutions and seizure of the

credit markets,' Taylor said.

Banks are not voluntarily

modifying problematic mortgages, experts and advocates say. In

Massachusetts, virtually no lenders have voluntarily modified

mortgages, according to Massachusetts Attorney General Martha Coakley.

'In

the last three months, lenders issued 4,721 new foreclosure notices in

Massachusetts. During that time, only 144 loan modifications were

filed,' said Coakley in a letter to the Boston Globe.

'We have

reviewed those 144 modified mortgages and found that virtually none

reduced the monthly payment owed by the homeowner,' Coakley said.

Unless payments are lowered, most homeowners in trouble will default,

she said.

'Many families struggling to hold onto their homes and

savings are not looking for charity or a bailout, and that is not what

loan modifications are about,' Coakley said.

In U.S. neighbourhoods, non-profit groups say they are scrambling to help people facing foreclosure.

The

mortgage bureaucracy is 'a tangle' and extraordinarily challenging to

navigate, Emily Rosenbaum, executive director of A Coalition for a

Better Acre, told IPS.

Typically a mortgage has been bought

and sold many times, and it may no longer be obvious which bank is the

owner. If a homeowner wants to negotiate a loan, many phone calls must

be made just to reach the current holder of the mortgage, Rosenbaum

said.

'It might be someone in Ohio and they don't even know the value of the property. It's quite a nightmare,' Rosenbaum said.

And

if finding the bank that owns the mortgage isn't enough, 'Getting to

the right person at the bank is a problem,' she said. 'In America you

don't get a person on the phone anymore,' she said. Instead, calls are

directed to a recorded message.

Once reached, and asked about re-negotiating the mortgage, the bank takes time to consider the request, Rosenbaum said.

'No

one makes a decision. We wait three to four weeks for the case to be

assigned in the bank, then another six weeks about the decision,' she

said. 'This hurts the homeowner because they get further and further

behind. It's essentially hurting the whole lending system that's

breaking down.'