During the early 2000s, the housing market was promising; house prices continually were rising, so banks were loaning to almost anyone. The problem with this situation was that the people who were getting approved for mortgages weren’t at all qualified financially to buy such an expensive home. In the fall of 2008, the housing market dropped dramatically. This caused homes to drop in price, which made homeowners owe more for their home than it was worth. Many homeowners were unable or unwilling to pay, which caused banks to lose money and merge with other banks.
After researching this situation, three proposals came to mind. For one, banks could reconstruct their mortgage loan interest rates to fit each family’s situation and secondly, twice a year, the U.S. government could tax each American citizen that is working, $.75 from their paycheck each year to help decrease the $11 trillion U.S. mortgage debt that we are in. Thirdly, banks all over the U.S. could lower their mortgage loan interest rates to a very low standard rate for not only people who want to buy homes but for people who already have homes. In the first proposal, banks could possibly reconstruct their mortgage loan interest rates to fit each family’s situation. In this case, the mortgage loan interest rates would fluctuate from family to family.
A great panic was caused in the Stock Market, resulting in job losses and companies going out of business. Mortgage was unable to be paid, thus causing foreclosure on many houses. The foreclosure crisis has not only caused the banking industry to lose Trillions of dollars; it has also played a role in decreasing home value on an international level. Despite the Obama Administration and Congress having taken many steps to stabilize the economy, like the Emergency Economic Stabilization Act of 2008, Wall Street Reform and the Consumer Protection Act of 2009, America has not seen many concrete results. But we must not lose hope.
My family has been severely hit by the foreclosure crisis. My mother lost her home in 2005 and my father is having problems paying his monthly mortgage and almost went into foreclosure last month. The foreclosure crisis is not just something you see on T.V. ; it has invaded our private lives. What I find most disturbing is the massive amount of bailout funds that were given to big companies that were about to go bankrupt.
The foreclosure crisis in the United States has reached epidemic proportions. The perfect storm of the sub prime lending issues, coupled with bank failures and layered with a sharp rise in unemployment has lent itself to more and more people losing their most cherished investment, their home. How do we solve this foreclosure problem? Many a great minds have pondered this question over the past year and many home retention programs have been launched. “Loan modifications alone don’t eliminate delinquency….nationally more than ½ of modified loans fell delinquent within 6 months” John Duggan, Comptroller of the Currency Here I offer a few suggestions that I think will not only begin to mitigate foreclosures in the United States but also put homeowners in a position to have the earning capacity to pay their mortgages over the long term.
In order to solve the problem, one must take a look at how it started and how this depression began. Around eight-nine years ago, the market in housing caused many people to chase after it. This caused a mistake of creating a domino affect that has hurt banks from lending out the high amount of money to people and finding out they are unable to sell them back because of the ridiculously high prices in mortgages people faced. Which caused banks to crash down because they were never able to obtain their money because the people failed to sell the high price houses they bought with the money. Thus, causing hundreds of people to lose their jobs and if people did not have jobs, they were not able to shop for anything.
What at first seemed to be an economic slump turned into a brutal crisis, and all eyes looked to the Government and Federal Reserve to help the economy. With the large amount of debt the economy faced the Federal Reserve stepped in and bailed out the banks in an attempt to smooth over the financial struggles of the economy. The banks that survived took precautionary measures, making it difficult for businesses and consumers to borrow (Love, 2011). Thus leading to businesses failing and less jobs being created. The large amount of debt had also taken its toll on the job market.
Should bonuses be paid to employees of companies which almost went bankrupt but didn’t because the company took bailout money from the government? Most bankers say yes, yet to the general public, this seems to be absolutely inexcusable. I decided to look into this topic further to satisfy my curiosity. The large banking businesses are in many ways at blame for the current recession. They lobbied for, and got, the relaxation of rules limiting how much debt they could have.
As the housing market fell, the banks no longer offered the refinancing that these borrowers counted on, and other economic issues caused many of them to be on even less firm footing then when they got their mortgages. Foreclosing on homes that are unsellable in a slow market helps no one. Foreclosing on a home is devastating to the owners. They not only loose their home, but their families are uprooted. They are faced with nerve-racking and disconcerting circumstances for everyone in the family, including and especially the children.
As we all know, the economy has been really bad for the past year and it has made millions of people loose their homes and their jobs. The economy is a big factor in this career and it could be a huge problem that can be faced for a long period of time and more than once. It had been very difficult to start out in the world of Business Administration as a student during this rough economic time. Many students have had a difficult time getting involved in the business world due to the low demand in jobs and internships. This is a big issue because it does not allow students to understand the real conflicts and agreements that have to be made day by day in the business world.