How To Solve The Foreclosure Crisis

Presently in the United States millions of homeowners are facing the prospect of losing their homes due to bank foreclosure. An event if allowed to occur has the potential of collapsing not only our financial system, but our social fabric as a nation. The unfolding crisis has prompted the US Government to enact aggressive monetary stimulus designed to reverse the downward spiral of home values. Unfortunately this approach has failed to achieve any meaningful results and perhaps has acted more as a red herring to conceal the real issues causing this debt implosion. With billions of dollars being pumped into the banking system why then are banks still timid to continue financing home loans?

The result is that many have to accept bankruptcy or short sales. My “real estate pause” idea is to close all interactions between the banks and new homeowners that are seeking to buy above their means. I understand that we cannot shut down all the real estate offices in the country, but the goal is to eliminate the loans that made the foreclosures a reality. My “real estate pause” solution consists of three principles. First, banks need to stop financing home buyers for more than they can afford.

Therefore, the obvious solution to these ill repercussions is by keeping people in the homes they currently own and helping prevent foreclosures. My proposal to make this a reality involves three key parties: economically-troubled homeowners, banks, and the federal government. As we all know, the Bush and Obama administrations have recently infused hundreds of billions of dollars into the banking system in order to help troubled banks stay afloat during this hard economic time. The purpose of this influx of money was largely required because banks had lost so much money due to mortgage defaults that they were left with too many foreclosed houses and too few payments on loans. As a result, lending trickled down to a slow stream; consumers now can't get the money they need in order to buy new homes because banks are afraid of more defaults.

From 2008 until now the national unemployment rate has risen from 5-6% to about 10.2% (U.S. Bureau of Labor Statistics). With unemployment rates continuing to climb, more and more Americans are stuck in large mortgages with no means to pay them. Many of these debtors are faced with mortgages that are greater than the values of their homes due to impairment resulting from the market collapse. With the job market in its current state and unemployment continuing to grow, most of these debtors look to default as the best solution to their problems. Simply, the best preventive measure to the foreclosure crisis would have been to not to overextend yourself.

Before the government and banks bailout homeowners, these institutions should have studies on what groups are going into foreclosure and reasons why these people are at risk or are losing their homes. People that are responsible and had a good job and took out good loans should be the first in line for aid, and people that took out risky loans and bought too much house for their incomes should have no bailout. The government needs to be wise and help out people that can eventually pay back their loans and are tax payers, so America doesn’t return to the same dilemma that everyone faces at this time.

The thought of the possibilities of losing a house would devastate us because we have a young child and my husband and I just started our lives together. My theory on how to improve the housing market is if our government and the major business companies actually work together the housing market will rebound in a couple of years. The first issue I will like to address is how severe the foreclosure rate situation really is to moderate pay everyday Americans if not all Americans. The housing market has plunged the economy to times worst than the great depression. No one has really pinpointed who is responsible for the housing market crash or the market correction but I’m sure there we... ... middle of paper ... ...would be able to afford to buy items without relying completely on credit.

The foreclosure crisis is a serious problem. Recessions are horrible for society to endure, but when people are losing their homes all around, the confidence in recovery needed to fuel the economy is eroded away until it seems almost hopeless to end the economic slum. Unfortunately there isn’t a simple solution to the foreclosure problem. The best way to solve any problem is to know what causes it. Foreclosure is the result of mortgage loans being given irresponsibly to people that can’t afford them.

The purpose of this writing is to analyze the foreclosure crisis and offer some solutions to keep people in their homes and satisfy the financial accounting records of the banking industry. With more lost jobs on the horizon and fluctuating adjustable mortgage rates, the foreclosure crisis continues to plague America. A recent report from the Mortgage Bankers Association reveals that 14% of loans are behind or in foreclosure. This is largely due to lost jobs in this volatile economy. Many factors are involved in addressing a situation like this and one solution alone cannot solve the crisis.

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.

Even more blame brokers who sold or traded these loans, building a stockpile of toxic assets that acted like a ticking time bomb. There was no delusion that these assets would turn sour, but investors and securities firms The first step in the Foreclosure Recovery should keep current homeowners in their homes through a renegotiation of monthly payments and interest. I do not mean to say that mortgages should be wiped clean and all debt forgiven, for that would run the risk of inflation and further economic harm. Instead, I propose lengthening mortgages to 50 or 100 years, lowering the monthly payments to keep homeowners from default, and preserving both communities and real estate values. To compensate banks for the lengthy delay in repayment, the government could loan banks a portion of the amount of the loan, for a... ... middle of paper ... ...olhardy as none at all.