Remedying the Foreclosure Crisis

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Remedying the Foreclosure Crisis . With the current environment of the lack of social stigma to those who foreclose being eliminated, foreclosure is no longer looked upon as a failure. Even a predominant law professor, Brent White, of the University of Arizona, professes that underwater consumers should default on their mortgages (http://www.latimes.com/classified/realestate/news/la-fi-harney29-2009nov29,0,3801270.story.) This type of attitude, as well a general frustration by the homeowner who feels they should be bailed out just as the banks were, is creating an increase in foreclosures. Homeowners feel it is better to be impacted by a negative credit score for a few years, than wait for the housing market to improve and to possibly regain their losses. Until a plausible solution is created, the foreclosure crisis will continue and property values will further plummet. While I do not feel that the government should create another bailout program for homeowners, a tax credit program would benefit several different areas of the economy and help reduce the foreclosure crisis. A tax credit program similar to the new homeowner credit would actually be more beneficial than the new homeowner credit. An incentive based on the actual mortgage balance compared to the appraised home’s value could be divided by the remaining timeframe of the mortgage. This would prevent a homeowner from reaping the entire tax credit in one year, and then selling the home within a current time frame. While this tax credit would reduce some tax funds received by the government, the impact would be minimal in comparison to loss of income that the government lost by creating the Mortgage Forgiveness Debt Relief Act of 2007 (HR3648). This ... ... middle of paper ... ...on a house is far less likely to default than a borrower who purchases the property with no money down. Financing of properties exceeding the property values should also be eliminated to prevent this crisis from occurring again. While the homeowner, mortgage companies/banks, and the government all have a hand in this foreclosure crisis, they equally have a part in reducing the impact. The change of regulations, introduction of a tax credit to reward borrowers who do not default due to the decrease in the property value, and promotion of the Mortgage Debt Relief Act of 2009, will all be critical in lessening the impact of the foreclosure crisis. While all foreclosures cannot be eliminated, the introduction, implementation, and follow through of more responsible borrowing can lend a hand in lessening this situation and future, potential, foreclosure crisis’s.

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