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How To Solve The Foreclosure Crisis

Powerful Essays
Solving the foreclosure crisis is a vital step toward the country’s economic recovery. The sooner America can resolve this crisis, the more rapidly banks will recover financially, home values will begin to rise once more and American citizens will return to work. The purpose of this essay is to provide a viable solution to the foreclosure pandemic. This proposal will benefit the homeowners, taxpayers, businesses, and the financial institutions in America. It will not benefit every household experiencing a financial hardship; however it will enable numerous American families to keep their homes. It will also aid in a more rapid economic recovery for America.

Why the HAMP program is failing

The Chicago Tribune dated December 11, 2009 reported that lending institutions are initially working with the HAMP program by accepting a temporary reduction in monthly payments, but only 38% of the trial modifications have become a permanent modification. The article explained that the lending institutions were bringing payments down drastically. One example I read of a lending institution’s failure to permanently modify the loan was a monthly mortgage payment going from $2,200 a month, down to $686 a month during the trial period of the modification process. After the trial period was over, and the homeowner had made every trial payment on time, she was still denied a permanent modification and was forced into foreclosure.

I believe the HAMP program, despite its wonderful intentions, is failing to reduce the foreclosure rate substantially. This, in my opinion, is due to the reluctance of the lending institutions to lose profits and/or potentially accept a loss on their investment by participating in this program. The HAMP program ult...

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...ach loan than they anticipated receiving on the original note. In the above example, the lender profited an additional $31,909. This increase in profit will eliminate the financial institutions resistance to modify the loans, boost investor confidence, which will keep investor’s money in the banks and purchasing mortgage backed securities once more. This will allow the banks to have more capital to lend. The trickle down effect will reach small and large businesses and they will be able to employ workers again and stimulate the economy. The taxpayers of this country will not have any tax burden placed on them because this program still makes individual homeowner’s responsible for the mortgage amount they agreed to pay. This program will keep the American dream alive and start to return wealth to American families and strengthen the financial institutions.
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