The current financial crisis, which had its roots from subprime mortgage crisis, began to increase dramatically in September of 2008. There have been significant economic disorders in United States alone. Major banks and financial organizations around the world are going bankrupt and writing down billion dollars. Housing markets are falling not just in United States but all around the world. This crisis is truly global and it is spreading like fire. Because of these economic crises, the US Congress came up with a $700 billion bailout plan to buy troubled assets from financial institutions who are struggling financially. Nevertheless, another bailout was proposed and it's the homeowner bailout. It is known that the foreclosure problem is getting worse and it is not planning to get better. There has been a number of housing proposals to help people with impaired mortgages and to prevent the increase in foreclosures. But it seems like with each proposal to save homeowners there are problems. The major problem is that more and more foreclosures are dumped on the market, which reduces the home prices considerably. The downfall in home prices means that more homeowners are overloaded with impaired mortgages, which means that their houses are worth a lot less than the original price that they bought the house for. Homes have lost already an average of 20 percent in value but, “most experts foresee another drop of at least 15 percent” (Zuckerman, 2008). Also as homes are abandoned by homeowners and are left empty because of foreclosure, it decreases the value of the whole neighborhood not just the one house. The decrease in house prices will obviously harm consumer assurance, consumer spending and will eventually affect not... ... middle of paper ... ...defaulting homeowners is the origin of this financial crisis. The goal of any bailout is to balance out the financial system and bring it to equilibrium. The financial system will not balance until house prices remain steady or step up, and house prices will fluctuate until the government finds a way to stop the increase of foreclosures. It is pretty obvious that the government is not doing their best to keep people in their homes, because they don't want to use the bailout for homeowners’ mortgage recovery. If the US government will not figure a plan out fast and the home prices will not stop declining, the economy is unlikely to recover. Even though the objective of the bailout bill was to protect the breakdown of the US financial system, the government needs to understand that the only way to stop this fire from spreading is to stabilize the housing market.
The last quarter twelve percent (12%) of American homes are in default of their loan, or in foreclosure. Add that to the previous four quarters and that is eight point seven (8.7) million homes in crisis. (Further on known as HIC's) The United States “Bail Out” helped major mortgage corporations, and their chief executive officers (CEO's), but not the families that are in, or were in these HIC's across America.
The country is certainly in crisis, but the crisis is not being caused by mortgage foreclosure. Foreclosure is simply a mechanism for people to deal with a debt they can no longer afford. Rather than being a crisis, the potential onslaught of home foreclosures (which has been slowed somewhat by the Obama administration’s “Making Home Affordable” program) is actually market forces hard at work cleaning out the mess in the real estate market caused by too much cheap money loaned to people who were not sound credit risks to buy homes they could not afford. When home prices are completely out of line with wages and people who would normally have a hard time getting a friend to loan them $20 are able to take out interest-only loans to buy over-priced housing, something is very, very wrong. While it may be painful for many people, the real estate market collapsing, including thousands of inevitable foreclosures, is not a crisis, but rather a result of the real crisis – unserviceable debt.
In essence, the problem leading to the foreclosure crisis is the recent decrease in people’s ability to make their loan payments due to job loss and lower wages brought on by the economy’s weak state. Rather than throw billions of dollars at big banks in the hope that they find ways to help the homeowners’ loans, the government should attack the problem through the individual. Simply, the government aid being spent in the hopes of stimulating the economy should be funneled toward reducing the balance of home loans to make the monthly payments affordable for the owner. By funneling the government aid directly to the American home owner in need, the economy would greatly benefit as homeowners regain their footing with their budget because the economy and foreclosure are directly related. When one hurts, so does the other; when one prospers, the other does as we...