The Current Recession and Mortagage Foreclosure Essay

The Current Recession and Mortagage Foreclosure Essay

Length: 2977 words (8.5 double-spaced pages)

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Introduction
Foreclosure has become an outbreak affecting the entire United States of America. Realtytrac just reported in the month of April 2011 that one in every 593 housing units received a foreclosure filing. (N1) That statistic is for just one month! Some states such as Arizona, California, Florida, Michigan and Nevada continue to be plagued with an influx of homes falling victim to foreclosure or some other form of default. Each home that is a casualty to a foreclosure, short sale or even bankruptcy was collateral for the lender holding the promissory note. The consequences tend to come at a cost for the lender selling the property but a deal for the buying investor. The costs incurred and the losses experienced by the affected financial institutions has required ongoing evaluation of their business models to account for the realized risks that these foreclosures have caused. Governing financial agencies are implementing and enforcing new regulations to mitigate further losses for financial institutions, government sponsored agencies and ultimately protection for the consumer. The deficiencies caused by the outbreak are shaping a new environment for property finance.
Accounting for Loss
Before a mortgage loan gets granted to the borrower(s), the loan is underwritten and reviewed for potential risk of default. Policies, procedures and business models all are used by the lending company to mitigate excessive exposure to risk of default. The lender can offset the vulnerability to default by reviewing the collateral property value, requiring private mortgage insurance, charging a higher interest rate, or charging additional points. A combination of any of these options may also be considered when evaluating a ris...


... middle of paper ...


...recovery. Conservative underwriting, improved regulations and oversight are some of the changes that are helping to reshape the property finance environment today.




Works Cited

Endnotes
N1:http://www.realtytrac.com/trendcenter/
N2:http://en.wikipedia.org/wiki/At-will_employment
N3:http://rismedia.com/2011-01-13/realtytrac-releases-year-end-foreclosure-report/
N4:https://dola.colorado.gov/app_uploads/docs/2011%201st%20Q%20Foreclosure%20Report.pdf
N5: http://www.fdic.gov/bank/individual/failed/IndyMac.html
N6: http://www.depositaccounts.com/blog/2010/12/review-of-the-2010-bank-failures-and-their-effects-on-depositors.html
N7: http://en.wikipedia.org/wiki/Savings_and_loan_crisis
N8: http://www.fhfa.gov/Default.aspx?Page=4
N9: http://www.fhfa.gov/webfiles/19863/4q10_fpr3311.pdf
N10: http://mortgage.nationwidelicensingsystem.org/safe/Pages/default.aspx

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