Solving the Foreclosure Crisis

2172 Words9 Pages
Of every issue facing the American people today, including our wars in Afghanistan and Iraq, our floundering economy, and our troubling health care system, none may be considered quite so frightening as the state of the sub-prime mortgage crisis. While matters in the Middle East and Washington often seem irrelevant and far away, the beast that has evolved out of low interest rates and plummeting housing costs is currently breathing down the necks of Americans in every state, city, and neighborhood. According to Realty Trac, the leading online database on foreclosure statistics, 3.4 million homes will fall into foreclosure before the end of 2009. Foreclosure and bankruptcy, often caused by unemployment or medical catastrophe, affect not only the individual families forced to move out of their homes (Hammerstein et al., 63). In an article for the journal Housing Studies, Dan Immergluck and Geoff Smith of the Georgia Institute for Technology claim that areas with high foreclosure rates have been repeatedly known to foster crime and discourage community growth (855). This speaks nothing of the personal shame, embarrassment, and personal risks normally associated with losing a home.

Yet the evidence suggests that the real issue of the conflict lies in the homeowner’s inability to modify the terms of their agreement with the mortgage company. According to the US Judiciary System, Chapter 13 of declaring bankruptcy was created to reschedule debts “other than a mortgage for their primary residence” (“Bankruptcy Basics”). This is a special provision given to mortgage companies under Chapter 13. The stated reason for this exception is to encourage low interest rates among mortgage lenders. In other forms of bankruptcy that include exempt...

... middle of paper ...

....” Housing Studies 21.6 (2006): 851-866. Web. 15 Dec. 2009.

Levitin, Adam J. “Helping Homeowners: Modification of Mortgage in Bankruptcy.” Harvard Law and Policy Review Online 3 (2009): 1-9. Web. 18 Dec. 2009.

Levitin, Adam J. and Joshua Goodman. “Mortgage Market Sensitivity to Bankruptcy Modification.” American Law and Economics Association Annual Meeting. Berkley Electronic Press, 2008. Web. 18 Dec. 2009.

United States. Cong. House. A Bill to Prevent Mortgage Foreclosures and Enhance Mortgage Credit Availability. 111th Cong., 1st sess. Washington: Library of Congress, 2009. Web.

“U.S. Foreclosure Activity Decreases 8 Percent in November.” RealtyTrac, 2009. Web. 18 Dec. 2009.

White, Michelle. “Bankruptcy: Past Puzzles, Recent Reforms and the Mortgage Crisis.” American Law and Economics Review 11.1 (2009): 1-23. Web. 16 Dec. 2009.

More about Solving the Foreclosure Crisis

Open Document