Banks can see the monthly mortgage payments as payments to the loan, plus as income for renting the home out. This way the homeowner still has title to the home, which gives a incentive for them to co... ... middle of paper ... ...d to fund programs in their own communities. This form of property buying is not limited. The major issue of the crisis in the first place is that people are not able to afford the mortgage. If we were able to take the mortgage out of the picture and make homes rent able and one day own able to the people that stay throughout the long term renting of the homes.
They are faced with nerve-racking and disconcerting circumstances for everyone in the family, including and especially the children. Some may even face homelessness because of it. It also hurts the bank, which looses money and has to extend the time and expense to try sell the house. In this economy selling is difficult and homes sit on the market for long periods of time. Empty houses hurt the community, making it less desirable to live in.
After all, the first step in solving the foreclosure crisis is to keep new people from finding themselves in the unfortunate situation of owing more for their house (mortgage) than they can afford. When a person is able to afford their house, they are able to consistently make the respective mortgage payments. A funny thing about money: Although you can’t take it with you when you die, you do need it to live. However, people must live within their means - a person should buy within what they can afford to immediately pay for and work towards creating a savings account. This is the secret to avoid finding yo... ... middle of paper ... ... ways to avoid foreclosure and lessen the overall amount of individuals whose houses are foreclosed.
Capitalizing on HUDs approach and showing the home owner how to make the most of their investment is a great solution to red... ... middle of paper ... ... homes purchased that cannot be afforded, plummeting property values, a group of consumers not prepared for unexpected expenses and emergencies, poor refinance decisions and bank lending practices needing reform. Implementing the solution of requiring home buyer and refinance education classes will empower consumers to be smarter buyers. It will also help to secure long lasting financial stability in the housing and other economic markets. Firmer lending regulations will keep the banking industry alive but with more responsibility on realistic returns on buyer’s investments and loans they provide. I plan to make a wise choice when I am able to purchase a home in the future.
Among the several things that desperately need to be changed or modified, is the process in which people apply and get qualified for a mortgage. There is a thing called debt to income ratio. This is where the amount of the prospective new home owner’s house payment is to remain at or below a certain percentage of their income. This is a great concept, but only if it were followed through by all financial institutions and mortgage companies. Lets be honest here, if a loan officer doesn’t close a loan, he or she does not get paid for the loan.
If they were to decide on a cheaper home that would mean a smaller mortgage and less they owe someone else. The sooner a person can get out of debt the better because you never know what is going to happen. Like I mentioned earlier, accidents and identity theft happen all the time and you never know if or when they are going to happen to you. Nothing is worse than being in debt and not having a source of income. The government has set up programs such as HUD homes for families that are less fortunate than others.
The first step that I stated was to eliminate some bad legislation. The concept that banks would loan money to people who cannot pay it back is absolutely ridiculous, but it continues to happen all the time. Freddie Mac may be the underlying legislation that has been the main problem however there is rarely just one piece of legislation that is the problem. I believe that it may be a web of legislation in the housing market that my need to be rewritten. This removal or rewriting of the legislation would allow banks to lend to people who they know will be able to repay the loan, and continually make payments towards the mortgage.
The plan also insures that the banks would continue to receive the money they need to survive. There is no way to completely stop foreclosure. However, in itself foreclosure is not a bad thing. Foreclosure remaining as a possibility would deter everyone. Families would be sure to buy the homes they can afford; banks would be sure to lend only to those who can repay.
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.
A five percent increase from 1999 to 2000 is the highest level of yearly increase since 1984. The recent upward trend (until the last two quarters) in economic growth has been accompanied by increases in the rates of growth of consumption spending, investment spending and exports. Productivity increases; decreases in unemployment, expansion in the labor force, and increases in the amount of capital have allowed real GDP to grow at faster rates. Yet during this same time period, consumers have reduced their savings. Conclusion After reviewing the unemployment, inflation and the GDP history of the last decade it is obvious why the United States economy has been ranked number one in the world.