Solving The Foreclosure Crisis

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The foreclosure crisis is not an unfamiliar one. However, people say that this is bigger than the Great Depression. Even though this is true, there should be a simple solution. In fact, so simple, that it just takes a few steps and back-tracking. So the foreclosure crisis is believed to have started because no down payments were made on mortgage loans and banks were giving out subprime loans, or a loan that is given even though the borrower was not qualified for them. To make sure everyone understands the loan system, I will explain very briefly how the loan system works. A borrower requests for a certain amount of money from a bank for a loan. Often times this is done through an application. They provide employment information and a credit check is involved in most circumstances. The bank then decides whether or not they will take the risk and grant the loan. It’s a risk because banks do not have access to a great sum of money. The Federal Reserve Board, or more commonly known as the Fed, sets the standard and requirements for banks. If the bank exceeds their limit, they are thus, “broke.” This is why banks take risks and put trust in their borrowers – trusting that they will pay the money back with interest. If every borrower breaks their promise, the bank would end up broke. So what about foreclosure? Foreclosure is when the borrower does not pay back their loans on a house. The bank pays for their house and the borrower owes the bank. If the borrower is unable to pay for whatever reason, or they choose willingly not to pay, then the bank takes the house away from them giving them a 30-day notice often times. This helped create the start of an economic crisis – a greater level of concern. The Federal Reserve Board also ... ... middle of paper ... ...student to understand that the loans they take out are borrowed and must be paid back. It also allows them to know that there are options available in case they get into a situation to where they cannot pay the loan back. In this same way, in personal opinion, there should be a pre-loan counseling. There should also be a financial counselor available at no cost, so that the borrower knows who to go for if, for whatever reason, they cannot pay the amount back. The pre-loan counseling should be a mandatory event prior to receiving the loan, however, whether or not financial counseling is required and how often it should be attended should be the decision of the bank. This is relatively easy in comparison with other issues that America is currently facing such as the war and health issues. All we need to do is handle this situation – as with any other – step by step.

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