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.
But it is very hard to say “I can’t afford this house” after the banks or lenders have said that you can. A lot of us were pushed into homes that were too much for us to handle because we were told that it’s no problem. Also interest only payments and balloon payments should not be legal. They only benefit the banks, the home owners always get into trouble with those types of loans. We have many houses in foreclosure that can be prevented; one way is to have the banks be regulated ... ... middle of paper ... ...rom that.
This may be true in some cases but it is not fair to penalize the mass of people who are not able to pay their bills on time because of the select few who take advantage of the government. Some effects of the foreclosure crisis are due to the loss of jobs, short pay periods, and interest rates. Job loss and unemployment are the main sources for the cause of the foreclosure crisis. Having a job is one of the main resources for paying a mortgage. So the fewer jobs the economy has the more foreclosures will occur.
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.
I believe this plan will decrease the percentage of foreclosure and help people keep their homes. An extended payment plan for eligible people is one idea but what about people who aren’t eligible? What about the people who simply can not afford to pay their mortgage or afford a down payment on a cheaper place? Or what about the people who have bad credit or no credit due to an unfortunate event such as identity theft? Many people put a lot of money into a home, then some incident comes along making keeping up with payments more of a challenge, but is it really unfair that their home ... ... middle of paper ... ...e doing the responsible thing in the process, the amount of missed payments should affect credit because the Person didn’t immediately take the actions necessary when they knew they would soon find themselves in a financial hole.
The government also bailed out failing banks after it became apparent that their current way of lending money was leading to crisis. This bail out meant that the banks were not forced to confront and fix their own mistakes. Thus stated, we are now in a crisis, and must make some changes in our mortgage loan policies in order to help the people who cannot pay their monthly mortgages as well as the banks, who are forced to foreclose and sell the houses at a loss. There are three variables that affect a monthly mortgage payment: interest rate, principle, and term. The banks simply cannot lower the principle, because they would lose too much money for loans to be beneficial to their business.
The problem with this system is that when the housing market is down, the banks cannot sell the house, and lose money in the deal. When banks lose too much money, they are either bought out, bailed out, forced to fire employees, or close down completely. As a result of the current economic situation, foreclosure is leading to banks going bankrupt; when the economy is doing better, foreclosure is less of an issue. This is because people have the money to pay their house bill when they have steady jobs with decent hours. This is not to say that the economy causes foreclosure, it just leads to it when people make irresponsible choices.
The government has to take steps in regulating these types of entities and not be looked upon as the factor of salvation in saving the banks and mortgage industry. The first suggestion to solving the problem of foreclosures would be to lower the mortgage interest to 4% across the board. This would give more people the ability to stay in their homes instead of the adjustable rate mortgage that they are now enduring which ultimately puts them into a situation where they cannot afford their monthly mortgage payments. Banks are greedy and by not giving the homeowner the above chance, they end up taking back a home under foreclosure ruling and in the end, lose out as they do not recoup the value of the home and it puts everyone in a no win situation. Based on mortgage interest rates, many first time home buyers do not realize the impact that the monthly payments will have on their net income.
If we do not fix what we have done in our past, now, we can never change what we will do in our future. This makes sense at any level of change and development when you take a deeper reasonable look at problems. Recently, I have heard that it is the Realtor’s fault for the soaring prices of homes for sale in many communities. I have also heard that it is the banks fault for lending out more mortgages than they are allowed to, therefore causing an eruption of foreclosed homes. Another great fault was caused by many people who went out and purchased homes when they did not have the actual funds to.
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.