This is a subject that has hit quite close to home for me. Recently, my parents underwent a financial hardship and subsequently lost their house this past year. They tried all available avenues to them to renegotiate the note, but they kept finding themselves in a Catch 22. Ultimately, after 2 years of trying to refinance, sell and proceed with so-called “work out plans” I helped them negotiate a deed in lieu of foreclosure just before a sell date was scheduled by the bank for their home in a full foreclosure.
The solution would have been a simple one, but one the bank was not willing to entertain. It seems the largest hurdle homeowner’s are struggling with is the past due deficiency that begins the foreclosure process. Lenders have a requirement that this past due balance on a mortgage is to be made whole in one payment, before they will accept any regular mortgage payments, which increases the balance overdue and the delinquency. More often than not this alone prevents homeowners from becoming current. To make smaller payments to the deficiency would result in some progress towards correcting any default by the homeowner, but this alone won’t fix the situation they may be in.
Many times the interest rate has become so formidable that what was once supposed to be an American dream has turned into a nightmare. It is common knowledge that sub prime lending has resulted in many of the foreclosures we see today. The families living in these homes simply can’t keep up with the rates their mortgage sometimes increases to. It is not without saying some responsibility does fall on the borrower, although we cannot expect them to refinance or participate in loan modifications if they could not qualify for a conventional loan in the f...
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...and it gives peace of mind to the homeowner who is not in fear of a pending foreclosure and can function with a clear mind.
I saw the stress and heartache my parents went through this last year. It was the house my dad had built himself for our family 12 years earlier. Going through a foreclosure is all consuming and it alters the way you go about your life. It is an embarrassing process for those going through it and I guarantee they would rather be compliant than have to explain why they are moving to their neighbors. Most of these people are not looking for a magic wand to make it right, they simply need a hand in understanding the process to make it less intimidating. If a solution was offered to those in a similar situation and explained properly, many of them would accept the help and show their appreciation by keeping up with the terms of the new agreement.
Sase, J. F., and Gerard Senick. Another Mortgage Tsunami? “Let Them Eat Cake” (Part Two). 2010. Print.
A majority of mortgage defaults that Americans used were on subprime mortgage loans, which were high-interest-rate loans lent to people with high risk credit rates (Brue). Despite knowing the risks, the Federal government encouraged major banks to lend out these loans to buyers, in hopes, of broadening ho...
Subprime loans started out as a generous, philanthropic idea. Giving people who had bad credit the opportunity to own a home regardless of their income or past credit issues showed compassion and caring for the poor, middle class and elderly who couldn’t possibly qualify for a home loan under the previous strict lending standards. However, predatory lenders used this vulnerable groups desire to live the American dream, to own a home, against them. Billions of dollars were made by loan companies and similar financial institutions by writing relaxed standards loans for borrowers as fast as they could. (Jennings, 2012) To make matters worse, lenders knowingly wrote loans to speculators who had no intention of ever living in the home; or at least no longer than it would take to flip the property. In a marketplace with quickly rising property values, the adverse impact of this activity was completely shadowed, and yet lurking in the background is the one market constant, what goes up must come down.
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.
To solve the foreclosure crisis we must take a multi-pronged approach that tackles the issues making the situation worse and that caused the problems in the first place. Our goal is to do this in an efficient and time conscious manner. Any solution is going to have its positive and negative aspects but we must try to maximize the former and minimize the latter.
After long meditation on the topic of “if I was allotted $150,000 for a distressed real estate purchase”, the first thing that came to mind was to get my home out of foreclosure. However, I quickly rebuked that thought from my mind, because the only thing that breaks my heart more than the thought of losing my own home, is the realization that many young men and women like myself have already fallen prey to foreclosure; I can only imagine the sorrow and the pain felt with watching you and your family being put out of the one place where you find safety and peace.
Every collapse offers new opportunities to rebuild with a new vision, but it’s up to individuals to take the right risks and the right sacrifices to transform a distressed piece of real estate into a progressive model for community development. While many see the current situation of real estate as an opportunity to purchase undervalued pieces of property as investments, I see the opportunity to become part of social and agricultural movements that have the capacity to thrive under current conditions. Urban farming and community coordination are both aspects of an environmentally sustainable society that ensures maximum returns on investment from financial and personal satisfaction perspectives alike. But before I come off as a complete idealist, I should assert that while heart and the right intentions are great, an investor needs to have a sound business plan, and a potential community action leader must have the right approach. With this in mind, if I were to acquire $150,000 in cash to be used specifically for a distressed real estate purchase, I would buy urban property in Detroit with the intent of making my new properties part of the growing movement of community supported urban farming.
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.
In the early 2000’s the housing market boomed, real estate was a hot investment and everyone was looking to buy a home. However not everyone can afford a home and a majority of people were forced to take out a mortgage to purchase real estate. During the housing boom banks were supplying subprime loans and upping the risk in the real estate market. These loans were not only risky but irresponsible on the part of the banks’ lending them, and although individuals receiving the loans thought they were being helped at the time, these loans were a major reason why so many people their homes, almost crippling toe U.S economy as a whole.
The 2008 financial crisis led to a sharp increase in mortgage foreclosures primarily subprime leading to a collapse in several mortgage lenders. Recurrent foreclosures and the harms of subprime mortgages were caused by loose lending practices, housing bubble, low interest rates and extreme risk taking (Zandi, 2008). Additionally, expert analysis on the 2008 financial crisis assert that the cause was also due to erroneous monetary policy moves and poor housing policies. The federal government encouraged the expansion of risky mortgages to under-qualified borrowers. Congress pushed for the support of affordable housing through extended procurement of non-prime loans for applicants with low income (Zandi, 2008). The cutting down of interest rates to low levels to supplement for technology bubble of early twentieth century and the effects of Sept 11, a housing bubble was created. This move facilitated individuals with poor credit to obtain mortgages in high percentage when lenders created non-conventional mortgages by offering mortgages with extensive amortization periods, loans with interest and payment alternatives such as ARMs (Angelides et al, 2011). Ultimately, interest rates rose again and many subprime borrowers stopped paying for their mortgages when their interest rate were reset to higher monthly payments. This paper will discuss the impact of the financial crisis as a result of subprime mortgages.
make the reality of homeownership possible to those that otherwise would not be able to
However, banks began to realize that as mortgage backed securities became more popular, they were able to sell their mortgages and recoup the cost of the loan with little or no risk to them. This lead to banks approving variable interest loans to customers that were normally considered ‘at-risk’, also known as a subprime loan. “While subprime rates vary from lender to lender, the Federal Reserve defines a subprime loan as one that carries an interest rate at least three percentage points higher than the rate on a US Treasury bond that has the same term as the loan. Subprime loans may provide credit to responsible people who may not have a strong credit history. However, subprime lending practices can be abusive or predatory, trapping unsophisticated borrowers in a cycle of debt while providing initially large profits for the lender.”
According to Kroger (2007) Foreclosures are set in their values and commitments that they learned from their parents and family without any attempts to find a different path (p. 64). Mary Ann has been immersed in her family of males since the age of three. They were farmers in Georgia, and they were farmers in Minnesota. Mary Ann was taught about hard farm labor, poor hygiene, and sex by her father and brothers. Being a little girl with no mother around a pack of men, her father and four older brothers, she only knew the farmer 's life and the ways of men. She’s dreamt about doing other things with her life and pursuing better things than the four walls of that pink and purple mobile home she’s grown up in and continues to live in currently, but because she is so set in her identity she refuses to change. When Guy offered to help Mary Ann move away from Flatwater and the awful job at the potato factory, for a mere moment excitement danced across her eyes but then she pulled herself back in and adamantly refused help, stating she moved around too much as a child and would never move her children, not even once, despite it meaning a possible better life and future for them. Guy then offered to give her money to buy a better home there in Flatwater, again she refuses, even when he offers it as a loan for her to payback. She screams at
Foreclosure in America has been a rising and prominent problem recently, and has destroyed many Americans hopes and dreams. Over 2.3 million homes were foreclosed in 2008, and an estimated four million homes will be foreclosed by the end of this year. Despite the efforts of many banks and lending companies, over half of homes will foreclose that have received their help. I believe that we have only started in the right direction in solving the foreclosure crisis. Giving money and lowering mortgage rates will help, but I believe we should find out why Americans are in this situation in the first place. We are being too stereotypical when we think the only reason someone is foreclosing is because of irresponsible payments or buying a home out of a person’s capabilities to pay for it. If we understand their situation, we will be better enabled to help and solve their crisis.
It was my dream to always own my own home. My wife and I set out to purchase a house on our own. In our process of trying to be first-time homeowners, we looked at so many houses until we were about ready to say maybe now is not the time. One day we were out driving not really looking and stumbled upon a house which we thought would be our home. We got the information we needed and made the call to see the house. The house was a newly built house with all the amenities my wife wanted. Not knowing the ends and the outs of purchasing a house, we thought that it could not be that hard. We went all in for this house, our house. The builder/realtor was not willing to negotiate the asking price of the house. We were even expected to pay closing cost. The contract included a lot of costs which we also found out were non-negotiable. Had we been represented by a agent, things may have gone a little differently. We were then told that there was another contract on the house and it would be taken. We lost the house we considered or thought would be our home.