The foreclosure crisis is a serious problem. Recessions are horrible for society to endure, but when people are losing their homes all around, the confidence in recovery needed to fuel the economy is eroded away until it seems almost hopeless to end the economic slum. Unfortunately there isn’t a simple solution to the foreclosure problem. The best way to solve any problem is to know what causes it. Foreclosure is the result of mortgage loans being given irresponsibly to people that can’t afford them.
With billions of dollars being pumped into the banking system why then are banks still timid to continue financing home loans? 1. They are concerned that home prices will continue to fall, adding further risk to their bottom line. 2. Due to the immense derivative (OTC- Over the Counter) losses banks are simply faced with using taxpayer bailout money to stay afloat and continue manufacturing these exotic instruments that Warren Buffett has labeled as “Weapons of Mass Financial Destruction” .
Due to the lenders greed, that itch to make a buck, it appeared that anyone and everyone were being approved for a mortgage regardless of their income. Now with the changing economy, layoffs and unemployment, the higher mortgages that were manageable are now unable to be paid and forcing people into foreclosure. Now after the “big guy” got their bail outs, they claim to be able to finance more mortgages and loans in an attempt to regain customers. However, due to the federal funds, there are hefty and strict regulations. The banks are now better off.
More or less the people who are homeless and out of jobs now, have realized where they have gone wrong in their funds a... ... middle of paper ... ...ters into buyers through education and techniques, and then we will have buyers for the foreclosed homes. Overall, banks do not want to take back any more homes then they are able to do, therefore the investors are called in to help ease the flow of homes in any market condition. Realtors help price homes at reasonable prices forth the benefit of the seller. Banks have witnessed the largest error in their felid of expertise and have undergone many changes to heal it. The homeowners have to realize that for their own benefit, if they are educated in financial terms, they can be more aware of what to do in certain circumstances.
Banks and creditors would bare the brunt of these substantial writes downs. With homes and mortgages valued at a fair market value there may be greater incentive for homeowners to continue making payments on their homes instead of resorting to default or short-selling their homes in order to exit their current mortgage agreements. There are many ups and downs to the business cycle. Many experts say that the scale of the current recession may be equivalent to that of the Great Depression. Certainly our country is currently faced with difficult times with unemployment and foreclosure rates increasing rapidly.
The housing boom of the 1990s and low interest mortgage loans lead to droves of Americans purchasing homes which were out of their actual price range. Creative financing with variable interest rates and interest-only loans was the name of the game at financial institutions across the country. However, as interest rates began to climb, homeowners found it difficult, if not impossible, to meet their loan payment obligations. Delinquent payments were not tolerated by the banks and homes began to be foreclosed. Banks had no idea that the wave of home foreclosures would soon turn into a tsunami of homes in their virtual warehouse.
The purpose of this writing is to analyze the foreclosure crisis and offer some solutions to keep people in their homes and satisfy the financial accounting records of the banking industry. With more lost jobs on the horizon and fluctuating adjustable mortgage rates, the foreclosure crisis continues to plague America. A recent report from the Mortgage Bankers Association reveals that 14% of loans are behind or in foreclosure. This is largely due to lost jobs in this volatile economy. Many factors are involved in addressing a situation like this and one solution alone cannot solve the crisis.
With our economy in a downslide and increasing numbers of foreclosures worsening our economic problems, it is obvious that there needs to be some intervention in order to prevent more foreclosures. Home ownership has always been a key portion of the American economy and an integral part of the American dream. We cannot allow the current crisis to let more people lose their homes and become disenchanted about home buying in the future. Not only will the defaults on mortgages further destabilize the American economy now, but they will also cause problems in the years to come as less people decide to venture into home ownership again. Therefore, the obvious solution to these ill repercussions is by keeping people in the homes they currently own and helping prevent foreclosures.
I researched and came up with the hypothesis that no matter how much a person cuts back and saves on their everyday living, if they still go out and buy a home to much out of the budget they would still not be able to save there homes from foreclosure. Simply because this problem base on the marketing and greed on Wall street. Foreclosure has been around since the late 80's and also in the 90's. Its just now the media discover the problem and put it in the public. It all started when Wall Street discover a mainstream in money by giving sub-prime loans to people that were out of their ranges and were more expensive then there credit score.
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.