Solution to the Foreclosure Crisis

The process of foreclosure starts immediately once the homeowner misses the mortgage payment at the expected time. Failure to pay at the stipulated time may be due to joblessness, divorce, medical problems, conditions of the loans, and death (Laing, 2009). Foreclosure is the current threat to the United States financial market and the economy. The advertisement of foreclosed homes which are being sold is causing a decrease in home prices and lowering the values of homes which are in the neighborhoods. Because of this, consumer expenditure has suffered seriously and the situation has worsened financial crisis with the Americans watching the value of their valuable properties, their homes lose worth.

The foreclosure crisis has occurred for many reasons. Banks offered subprime loans and teaser rates. They approved under-qualified people to borrow more than they could afford to repay. These borrowers, so desperate to own a home, borrowed over their means, counting on a future and now non-existent upswing of the housing market to allow them opportunities to refinance at lower rates after teaser rates expired. 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.

The foreclosure crisis has become a leading problem in our nation. It appears the problem will get worse as the unemployment rates increase. The crisis has taken down financial institutions. The problem has affected everyone from different backgrounds and income brackets. Besides the homeowners that lost their homes, other homeowners are battling low property values.

The current economic disaster began, in brief summary, as homeowners started to default on their mortgages and the price of homes decreased. Now, many homeowners with adjustable rate mortgages who had planned on refinancing their house to a fixed rate once the adjustable rate increased are unable to refinance because their house value... ... middle of paper ... ...America. Though solving the foreclosure crisis may be a long and daunting task, with hope from the people and appropriate measures taken by the government, it can be solved. Works Cited Hagerty, James R., and Nick Timiras. "House Under Water: Do You Stay or Walk Away?."

The argument over who should be at fault for the subprime mortgage crisis and housing market collapse in the United States has been a heated debate. Even though home foreclosure keeps rising, there should be some accountability for the economic meltdown resulting from the subprime mortgage situation. Should we blame banking institutions, mortgage lenders, brokers, and investors for this crisis? Should minorities be blamed for recklessly accepting loans and defaulting on them after realizing they could not meet their obligation? Should we blame the government for their inactions for not protecting victims of predatory lending?

The Outlook for Housing Starts 2009-2012. November 2008. http://www.cbo.gov/ftpdocs/98xx/doc9885/11-17-HousingStarts.pdf. Congressional Oversight Panel. An Assessment of Foreclosure Mitigation Efforts After Four Months. October Oversight Report.

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.

We as a nation must find an alternative to home foreclosure that offers hope for homeowners who feel it is impossible to regain control over their mortgage payments. Being from an area of the country hit very hard by the automobile industry’s downfall I know many people who are in need of immediate help, as they are in the process of having their mortgages foreclosed. Several homeowners took advantage of the easy to obtain credit experienced in America during the late 1990s and early 2000s, and now find themselves “buried in their mortgage”. They borrowed amounts above their home’s value, and now that these values have dropped tremendously so they cannot even come close to selling their homes for what they owe. Lending companies are partly responsible for the troubled real estate market we are now experiencing, as they should have never allowed anyone to borrow more than 90% of a homes value.

Web. 18 Dec. 2009. White, Michelle. “Bankruptcy: Past Puzzles, Recent Reforms and the Mortgage Crisis.” American Law and Economics Review 11.1 (2009): 1-23. Web.

This last group of consumers and many homeowners that were responsible and are in need of help due to unemployment should be the focus of much needed solutions as part of the real-estate recovery. According to many research articles and papers written on the United States’ economic crisis, there are various causes that affected the financial system; one is the greed of the loan institutions that made a lot of money off bad mortgages. Mortgage brokers determine which people were granted loans, but they were not made accountable because they passed the bad debt to the consumers in “mortgage backed assets” and then took commissions for approving poor loans (Jarvis, 2009). The responsibilities were sold to the trusting investors who were promised a good return. However, homeowners couldn’t afford the explosive debt incurred, which lead to catastrophe domino affect of many people losing their homes (Jarvis, 2009).