HUD helps first time home buyers become contributors to the American economic stream. HUD requires buyers to attend financial classes, to understand and successfully save the correct down payment, and to also put in sweat equity into their pending new home. This three way approach to home buying is an established best practice for home buyers. Non HUD home buyers do not always know the important information needed in buying and owning a home. Capitalizing on HUDs approach and showing the home owner how to make the most of their investment is a great solution to red... ... middle of paper ... ... homes purchased that cannot be afforded, plummeting property values, a group of consumers not prepared for unexpected expenses and emergencies, poor refinance decisions and bank lending practices needing reform.
In some areas of the country, the homeowners’ are as much as 65% upside down. The Mortgage Bankers Association reports that there will be a significant increase in prime-fixed rate mortgage defaults, as the economy struggles with increased number of job losses expected. This does not even address the looming commercial property loans that are delinquent. Although the mortgage crisis seems to have started with the “sub-prime” loans and the loose lending practices, it has had a much deeper impact on the over-all US and world economy. As people lose their jobs or experience a slowdown in business and decrease in their household incomes, it is harder to meet their financial obligations.
As a result, lending trickled down to a slow stream; consumers now can't get the money they need in order to buy new homes because banks are afraid of more defaults. I propose that the federal government pass a new relief program, but this time, it will help consumers directly, instead of giving banks money that they then refuse to lend out. This program should target those homes in which mortgage payments have not be... ... middle of paper ... ...erefore, under my plan, the existing penalties would be erased for the homeowners receiving the six-month loan. This would, in effect, give these homeowners the fresh start that they need. The penalties would still apply for any late payments after this government loan ends, however, to give homeowners an incentive to get their act together during their six-month reprieve and pay their mortgages to evade future repercussions.
First, banks need to stop financing home buyers for more than they can afford. Sellers need to be aware of their buyers so that the home does not go onto the foreclosure list. Second, banks must only approve mortgages for homes that have been correctly and fairly priced to preserve home values. Many Americans right now are selling their homes for a depreciated price so that they can get out before they start losing even more money. Until buyers start buying the houses at the correct value, the mark... ... middle of paper ... ....
This problem gives us the opportunity to fix a system that is in desperate need of overhaul in order to help people from all economic backgrounds. First, sub-prime mortgage lending practices must cease. This program has allowed people to purchase homes they simply cannot afford. Buyers must evidence a steady flow of income, show a high credit score, and the ability to pay off debt. Loaning substantial amounts of money to people who have no way of evidencing that they are capable of paying off loans is a reckless practice.
Before the government and banks bailout homeowners, these institutions should have studies on what groups are going into foreclosure and reasons why these people are at risk or are losing their homes. People that are responsible and had a good job and took out good loans should be the first in line for aid, and people that took out risky loans and bought too much house for their incomes should have no bailout. The government needs to be wise and help out people that can eventually pay back their loans and are tax payers, so America doesn’t return to the same dilemma that everyone faces at this time.
Meaning, the government was essentially trying to help people stay in homes they could not really handle. The best way to help the real estate market recover is to help strong borrowers who are struggling to pay their mortgage due to economy and by encouraging other good candidates to jump into the market through increased tax incentives. Hoping that loan modification will work just is not a good plan, for borrowers, investors or taxpayers. Ultimately, the foreclosure crisis is being perpetuated by the unemployment and the best solution is to address the default.
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.
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.
With a little creativity and a few concessions from both the mortgage lenders and borrowers, the American Dream of homeownership can survive. The real-estate market as a whole would benefit from a solution to foreclosure as fewer foreclosed homes on the market would help restore property values for all American homeowners. The drop in the real-estate market was inevitable as home prices were over-inflated due to mortgage fraud and loose credit, but we must get a grip on the foreclosure rate and stabilize the market. We as a nation need to learn from our mistakes and regain control of the mortgage industry. As always in America, if we work together to solve the issues faces by thousands of American homeowners everyone involved will benefit in the future.