Presently in the United States millions of homeowners are facing the prospect of losing their homes due to bank foreclosure. An event if allowed to occur has the potential of collapsing not only our financial system, but our social fabric as a nation. The unfolding crisis has prompted the US Government to enact aggressive monetary stimulus designed to reverse the downward spiral of home values. Unfortunately this approach has failed to achieve any meaningful results and perhaps has acted more as a red herring to conceal the real issues causing this debt implosion. With billions of dollars being pumped into the banking system why then are banks still timid to continue financing home loans?
The value of these properties dropped so much that many home owners lost their down payment and could not pay the mortgage balance. These sellers had to pay c... ... middle of paper ... ... properties bought by people with insufficient funds. To solve the problem, a 20% down payment or higher needs to be required for buyers. Those who are able to supply this large initial payment are more likely to have a history of capable money management and pay off their mortgage loans. For interest-only loans and other “exotic” loans such as adjustable rates and 40-year payment plans, a much stricter home-buyer approval process must be set up.
Foreclosure has done extensive damage to the real estate market due to the number of people who are afraid to buy a home and possibly lose it all. Job loss, health, and missing payments are the leading causes in foreclosure that could happen to anyone at anytime. Lending associations are also losing it all during this foreclosure crisis. When a foreclosed home is not bought, the lending association loses money. America and American people need to step it up and demand the best for themselves and their economy.
Another great fault was caused by many people who went out and purchased homes when they did not have the actual funds to. When we look at the crisis in a larger spectrum, the guilt should be spread to each and everyone because we each played a major part in this wrong doing. I am sure that by now, the banks have reasoned with themselves about what caused the abundance foreclosed homes and how they can change. The real estate professionals including agents, salesman, appraisers, brokers, and many others have also realized where they have gone wrong and are paying the penalty for it. 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.
Many factors are involved in addressing a situation like this and one solution alone cannot solve the crisis. We saw millions of dollars in stimulus money go to lending institutions only to be left wondering why the problem is not going away. The Problem There seems to be so many factors to this crisis it makes the head spin when trying to categorize and analyze them all. However, there are major points to be solved that, in turn, will solve the minor ones. First, property values have declined; so many homeowners are left paying a mortgage on property that is worth less than what is owed.
It’s hard when a home becomes a house: left with walls, stripped of memories. It’s disheartening when a family becomes a number: left with foreclosure, stripped of dignity. In 2007, over-extended borrowers began to default on their sub-prime mortgages; mortgages that increased as more and more families chased the American dream during the housing boom. The interest rates were “teasingly” low, but more detrimentally, they were variable. When mortgage rates were readjusted, homeowners found that they could no longer pay the upped monthly payments.
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.
In the process, consumer spending has suffered mightily and deepened the recession as Americans have seen the value of their most important assets, their homes, are falling in value. There were a lot of different factors that went into the development of the problem. There was buying a house that cost more than the people could afford, and there was taking on a mortgage payment that had monthly payments that were really high. There was the problem, too, of people who had no savings after they bought their house, so if anyone got sick or lost a job they couldn’t make their payments. Finally, experts are not sure of the solution to the foreclosure problem.
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.
To their (loan officers) dismay they will most likely end up having to pay back that money or be at risk of loosing their jobs due to banks closing. If these citizens were actually shown what these loans will do throughout the loans lifetime (all the ups and downs of the interest rates) then they might not sign up for them, knowing they will not be able to pay the adjustable interest rates that banks rise and drop ever so often. Due to these loans not being paid back the bank has to take their houses and now they are out of thousands of dollars, left with hundreds... ... middle of paper ... ...ld teach people what they are signing into, so that they know what they will be able to pay at a constant. Fixed interest rates for all loan seekers (to me) have become vital to solving the foreclosure crisis. This is how the crisis shall be solved to me.