Solving the Foreclosure Crisis

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Even before the implosion of the stock markets in 2008, there were foreboding signs within America’s housing market. Foreclosure signs stood in yards and fliers advertising the sale of foreclosed homes hung from light posts. Homeowners previously enjoying a piece of America’s real estate pie, watching the value of their homes steadily rise, felt the coming recession and were forced to sell their homes to either pay off debts or slow the significant losses to their home equity. Once the stock market crashed, the recession became a depression and America found itself amid a full-blown foreclosure crisis, which coincided with the credit crisis. The value of people’s homes plummeted and unemployment soared, while they were trapped paying astronomical mortgages and home loans from before the destruction. To make matters worse, most banks lying in ruins and those that managed to survive were not lending to those in desperate need. Now that the dust has settled, America finds itself in a housing hole due to poor fiscal planning, and will only dig itself out through the coordinated efforts of banks, housing developers and Congress.

Before discussing how to bring an end to the foreclosures, the cause of this crisis must first be determined. In simple terms, it was caused by a lack of sustainability within the housing market. For years, homeowners watched the value of their homes climb with seemingly no limit. It was a sellers’ market and people clamored to get into the housing market which seemed like a sound investment. Banks gave out hefty loans and mortgages to people who in less lucrative times might not have qualified, assuming the value of the home would continue to rise meaning a guaranteed return on their loan. Capitalizing on thi...

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...d be applied across the board to all lenders, and new homeowners would no longer be penalized for the mistakes of previous owners and lenders. After all, for new life to be breathed into the housing and financial markets, both need new investors. The lack of faith on the part of lenders will continue to be met by equal skepticism from borrowers and investors. A standardization of loan terms and criteria will get the economy moving again.

America must immediately address the issues within the housing market, as was done months ago within the financial market. And just as is true with the corporate bailouts, this legislation should only be used temporarily to jumpstart the reversal of foreclosures and give the government and the American people time to come up with a more permanent solution and create a more effective and sustainable market solution for the future.
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