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.
The first step in solving the foreclosure crisis is to stop lending money that we cannot afford to pay back. Lenders are greedy and they just push people into loans that are too much for them to handle. Once the lending portion is under control then we must take care of the current problems, which are all the people that currently have the loans that they can’t afford. Stop lending too much money! A person should be able to make the monthly mortgage payment with one and a half weeks to two weeks of paychecks.
My sister and her husband had defaulted on their home mortgage leaving them scrambling for a place to live. I saw that greed a huge factor feeding the housing crisis, yet I didn’t know which side was to blame. My sister and brother in-law wanted more house than they could afford, and the bank was willing to lend them more than they should. This crisis sent the government into action to avoid what many were calling the greatest financial crisis of our time. Although many experts suggest an economic depression was imminent without the Troubled Asset Relief Program (TARP) many of the funds were used poorly because the investment banks didn’t acknowledge their risky investments, the funds should have directly helped consumers hurt by the mortgage crisis, government financial relief efforts have had a minimal effect on the economy.
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.
Another way that could solve the crisis is to have the banks modify all loans and lower interest rates to whatever it takes fo... ... middle of paper ... ...ecting not only those who are foreclosing, but the nation around them. It leaves open space that could be used and wasted money sitting on land. The banks could be making more money if they do not foreclose than if they do. Giving people opportunities to pay off their mortgage helps America as a nation and helps people grow and learn from their previous mistakes. Giving people rights to their property and then taking it away because of unemployment and possibly excessive spending makes our nation looked down upon.
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” .
When these basic items are in jeopardy mortgage payments often suffer first. The reality is that no one is going to pay their mortgage if their children are cold and hungry. The decline in the value of the American dollar has also been mentioned as a reason for the mortgage crisis. Parallels have been cited between what is happening now and what happened prior to the Great Depression. Inflation has robbed too many homeowners (and non-homeowners) of their savings, making the money they do have of little value.
With unemployment levels rising and average pay levels decreasing, more and more families are finding themselves unable to pay their mortgages and hence losing their houses to the mortgaging banks. Because most of these foreclosed properties have become foreclosed not because of bad decisions on the part of the consumer, but rather due to national economic trends, we need to find a way to reduce the number of properties getting ready to be foreclosed. Because foreclosure of properties is such a deep current economic problem, it will be difficult and near impossible to find a quick and easy solution. Yet there are steps that the government and banks can take to make the current situation a little better and avoid a crisis of this nature in the future. Since not all foreclosures result due to the owners’ negligence or reaching beyond their means for buying a property, those creditees that were responsible and in a position to pay some form of payment to the mortgagers should be given the chance to retain their houses by paying what they could.
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).