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factors the lead to housing crisis 2008
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Recent figures show nearly 3 percent of all U.S. home mortgages are now in foreclosure, and experts are saying that number will rise for at least another year. The foreclosures add to the growing pool of unsold homes in a market that has been deteriorating for the past two years. This is driving down prices of all homes, most of those whose owners have never missed a payment. That’s why it is in everyone’s interest to stop this wave of foreclosures and get the unsold inventory off the market as quickly as possible. Unfortunately, the power to solve this crisis is in the hands of very people who caused much of the problem in the first place: bankers and the federal government. Pressured by federal bureaucrats after passage of the community reinvestment act, bankers gave mortgages to people who should never have gotten loans, asking for nothing down and little proof of income. Now, having repossessed the homes, the banks have become sellers, a role for which they are woefully ill-suited. Banks are notorious for letting offers pile up on their desks for months at a time. Would-be buyers – discouraged by the lack of response and ultimately enticed by the plethora of more accessible homes on the market – move on to other properties, most of which are more attractive than empty bank properties because someone is living there and taking care of them. Making matters worse, bankers give Realtors incentives to steer buyers away from the foreclosed properties by offering smaller commissions than the going rate for other homes. Is it any wonder that the inventory of foreclosed homes continues to grow? There is a way out of this mess, but it will require exactly the kind of short-term pain that everyone in government has been striving to a... ... middle of paper ... ...ttled and a buyer’s money is sitting at the title company, the FDIC can take weeks for final signatures. Left in the FDIC’s hands, millions of houses will sit empty and drag down values of surrounding properties for years to come. Congress needs to get these FDIC properties into the hands of whatever banks can show a track record of liquidating foreclosed properties in 60 days or less. This isn’t rocket science. A well-priced home in the hands of a responsive seller will sell fast. Get these foreclosed home into the hands of a few efficient banks and this crisis will soon be over. The real problem lies with the system that created the problem. If the federal government would just get out of the way, the good banks would step up to solve the crisis, the bad banks would disappear and a stronger system would emerge to ensure that this sad history never repeated itself.
-1. How could the Federal Reserve prevent and solve financial crisis? – The function of Federal Reserve.
The reality of the worst financial crisis in the last 80 years has led to wide speculation of its causes. While a plethora of theories have been offered, none have been as persistent and as patently false as the assertion that the Community Reinvestment Act of 1977 played a significant role in the housing bubble collapse. Critics of the Community Investment Act (CRA) argue that by pushing banks to meet the credit needs of low-income borrowers, the law forced lending institutions to take on riskier loans that proved to be fiscally irresponsible. The securitization and speculation of these low quality loans led to the housing bubble collapse and the wider financial crisis. This argument is subject to a number of problems, namely: the CRA never mandated lower lending standards, the CRA was enacted over a quarter of a century before the housing crash took place, none of the hundreds of banks that collapsed were subject to CRA legislation, CRA loans had a historically low level of default, and CRA loans comprised an extremely low amount of subprime loans during the relevant period of the crisis. While the CRA may have played some small part in the collapse of the housing bubble and subsequent financial crisis, it is clear that its effect was negligible. There are simply too many mitigating factors that limit the extent to which the CRA could have adversely affected the housing market for the theory to be plausible.
The Sub-Prime Mortgage Crisis of 2008 has been the largest financial crisis to take place since the end of the Great Depression. It was the actions of individuals and companies that caused this crisis. For although it could have been adverted, too much money was being made by too many people in place of authority to think deeply on the situation. As such, by the time actions were taken to attempt to rectify the situation, it was already too late. Trillions of dollar of tax payers’ money was spent trying to repair the situation that was caused by the breakdown of ethics and accountability in the private sector. And despite the government’s actions to attempt to contain the crisis, hundreds of thousands lives were negatively affected before, during, and after this crisis.
There is, I believe, no easy way to solve the foreclosure crisis. The reason for this is that the underlying problem is not merely the individual foreclosures. The underlying problem isn’t even all of the foreclosures as a whole which constitute the crisis. No, the real underlying problem is ultimately human greed. Consequently, the way to solve the foreclosure crisis, I believe, is not merely through some kind of “stimulus plan.” Yet, this matter shall be examined more thoroughly later.
Because of the massive increase in the economy, banks handed out massive amounts of loans. When the stock market crashed, popping the economic bubble, millions of people lost their jobs. The loans that millions had taken out, because they believed they could pay them off folded. People feared that the banks were going to crash and helped lead them to their destruction but pulling out all there money. Without the banks no more loans could be given out, and with no loans the economy already suffering due to the stock market crash freeze in place. A weak ruined economy with no support made the crash so devastating to American life. The banks could of easily avoided failure by not giving out as many loans as they did, and choosing more secure loans. Not only could they have chosen better loans, they could of held a higher percent of deposited money to help prevent them from running out of money. Though this would of slowed down the progressive of the economy, with less money being circulated, it would allow for a much safer steady
Subprime mortgage crisis is my preferred topic of discussion. The reason behind taking this topic is that housing is a basic need thus everybody needs it irrespective of the financial situation he is in. In this regard, the idea of subprime seems to be the only way to meet this need in a more professional decent manner. The case of subprime mortgage crisis presents a nice area of study on how a country can solve a financial crisis that was not anticipated, but is affecting many people across different sectors of the economy. Previously, I did not know that subprime can qualify for any mortgage because they have no financial credibility. I am surprised on how financial institutions gave in the temptation of lending money to subprime population hence leading to this crisis.
...conomic recession we can conclude that we learn very less from history. The same uncontrolled and market that resulted in the destitution of the 1930’s still caused the economy at large to claps for families to loose there savings, houses, and jobs. President Roosevelt took one of the great dissensions of the depression era when he announce the Emergency Banking Act and the Glass-Steagall Act which banded the involvement of banks in the stoke market (foner, 800). By taking such action Government was able to stabilize the financial system. But today politicians choose to ignore this great historic lesson that could have saved us from the national disaster that is still affecting many households. If they still are refusing to put a tougher control measure in place to control the banking system, we could end up in a worst situation than even what we have seen in 2008.
The frequency of foreclosure in our nation today is dangerously high. The strain from the recent economic downturn has put many families and individuals in a financial chokehold preventing them from being able to make their monthly mortgage payments. Consequently, many of these people feel they’ve punched a one-way ticket to foreclosure. With all these homes being foreclosed on, we face a very real crisis.
As the lease of my apartment is coming to an end it had me thinking of achieving my own American Dream of home ownership but as I do my research I find the dream is far from coming true. I am sure that the issue of housing prices and rent rates are what most of us Bay Area residents talk about and debate. It is an issue that needs to be addressed by the officials of the area, city mayors, affordable housing committees, social justice activists,lawmakers, and even employers. Skyrocketing prices, low inventory, and investors’ bidding wars are not only pushing the middle and lower classes out of San Francisco and the Bay Area out but will completely eliminate them.
In conclusion, people have still not been held accountable for one of the largest financial collapses of all time. I think that there should be a limit on who gets qualified for any loan in order to avoid this situation again. I think that everyone who was responsible should be held accountable for what happened even if it means banks going under.
The subprime mortgage crisis is an ongoing event that is affecting buyers who purchased homes in the early 2000s. The term subprime mortgage refers to the many home loans taken out during a housing bubble occurring on the US coast, from 2000-2005. The home loans were given at a subprime rate, and have now lead to extensive foreclosures on home loans, and people having to leave their homes because they can not afford the payments. (Chote) The cause and effect of this crisis can be broken down into five major reasons.
In my opinion the government spends way too much money (taxpayers money) to make sure that the bigger institutions do not fail and have a huge negative affect on the economy. The way that many people, myself included, think the government should handle this is to break the bigger institutions up into smaller ones that way we can still let the institutions go bankrupt and not have it effect our economy in a big way.
“One out of every two hundred homes will be foreclosed every month, making 205,000 new families enter into foreclosure,” Mortgage Bankers Association. The housing industry in the United States is undergoing an unfortunate crisis. There are way too many homes being foreclosed, which cause a ripple of problems.
Mortgage loans are a substantial form of revenue for the financial industry. Mortgage loans generate billions of dollars in the financial industry. It is no secret that companies have the ability to make a lot of money by offering a variety of mortgage loan products. The problem was not mortgage loans but that mortgage companies were using unethical behavior to get consumer mortgage loans approved. Unfortunately, the Countrywide Financial case was not an isolated case. Many top name mortgage companies have been guilty of unethical behavior. Just as the American housing market was starting to recover from its worst battering since the Great Depression, a new scandal, an epidemic of flawed or fraudulent mortgage documents, threatens to send not just the housing market but the entire economy back into a tailspin (Nation, 2010).
Affordable housing in the United States describes sheltering units with well-adjusted housing costs for those living on an average, median income. The phrase usually implies to applied rental or purchaser housing within the financial means of lower-income ranges specific to the demographics of any given area. However, affordable housing does not include those living in social housing owned by government and non-profit organizations. More specifically, the targeted range for housing affordability sets below 30 percent of a household's annual income, including all applicable taxes, utility costs and home owners insurance rates. If the mean income per household breaches the 30 percent mark, then the agreed status becomes labeled as "unaffordable" by most recognizable financial institutions.