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How to Solve the Foreclosure Crisis

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“How to Solve the Foreclosure Crisis?”

“How to solve the foreclosure crisis?” This is a very troubling question currently facing our country today. The foreclosure crisis fueled by subprime mortgages, was a ticking time bomb waiting to explode. Many Americans hold large mortgages with adjustable rates that continue to increase. It was only a matter of time before the market would come tumbling down. 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. The credit phenomenon, of buy now and pay later is one of the major culprits to blame for the current situation. This is a major reason why the country is in such trouble right now. With growing unemployment, many Americans are unable to pay off their current debts. In addition there is no incentive for many homeowners to pay off a mortgage that is greater than the current market value of their home. With their backs against the wall many Americans faced with unemployment and large mortgages on their shoulders have only two options, bankruptcy or default.

Banks and their creditors are taking a major hit as a result of the foreclosure crisis. Default on mortgages is continuing at a ...

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...nks and creditors could switch to the fair value option in order to value property and mortgages. Banks and creditors would bare the brunt of these substantial writes downs. With homes and mortgages valued at a fair market value there may be greater incentive for homeowners to continue making payments on their homes instead of resorting to default or short-selling their homes in order to exit their current mortgage agreements.

There are many ups and downs to the business cycle. Many experts say that the scale of the current recession may be equivalent to that of the Great Depression. Certainly our country is currently faced with difficult times with unemployment and foreclosure rates increasing rapidly. However, the United States of America has some of the best and brightest minds in the world and I am certain that with time we will find a solution to this crisis.
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