Proposed Solution for Solving the Foreclosure Problem

1368 Words6 Pages
My proposed solution for the foreclosure problem has several parts. They include eliminating and legally banning interest only loans, mandatory loan modifications, government tax incentives to stay in a potentially foreclosed home and consumer education. Many years ago the mortgage companies created the thirty year home loan. It seems like this extended payment plan would benefit the homeowner by allowing more time to pay for the mortgage. The payments were smaller and more affordable than those of a shorter loan. But, the long term time frame was most favorable for the corporations. The thirty year loan plan originated due to the banks theory that many buyers could possibly have financial difficulty in the period of thirty years. The lender would also benefit from the interest calculated in this long span payment plan. In thirty years the buyer pays many times the purchase price in order to own the property. And if during that length of time the home is repossessed, the company makes lots of money all over again on the same home or property. This is especially true if the home market values remain stable. An even more amazing loan plan than the thirty year is the more recent interest only loan. After two years of straight interest payments, and pure profit for the financing company, the loan payment begins to escalate. So, the consumers dream home must be sold or refinanced in order to avoid the cost of the outrageous increasing payment to the greedy lenders. These loans helped the mortgage companies do well, but the dream home will cost more than ever dreamed if the loan is kept. For the stressed out homeowner this payment is often unaffordable and although the corporation may do well the consumer is left in d... ... middle of paper ... .... This mindset needs to be changed in our society because it is a stressful and deceptive way of life. Without much knowledge the public is preyed upon by those getting rich on the interest paid, along with late fees and other fines. Then, besides the mandatory modification the homeowners with a loan problem should also be given government tax incentives, credits and other incentives to stay in the home for an extended length of time. There is no short term fix for all of this of course, but I have made the proper suggestions to do away with all the brown front lawns void of Christmas decorations this year. One of them belonged to my now displaced family and the hardship is one reason I am seeking money for my education. If I win the scholarship money and become a homeowner one day I plan to be especially wary of any loan that could lead to foreclosure!
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