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.
With our economy in a downslide and increasing numbers of foreclosures worsening our economic problems, it is obvious that there needs to be some intervention in order to prevent more foreclosures. Home ownership has always been a key portion of the American economy and an integral part of the American dream. We cannot allow the current crisis to let more people lose their homes and become disenchanted about home buying in the future. Not only will the defaults on mortgages further destabilize the American economy now, but they will also cause problems in the years to come as less people decide to venture into home ownership again. Therefore, the obvious solution to these ill repercussions is by keeping people in the homes they currently own and helping prevent foreclosures.
Some people can simply not afford to buy a home, and these people must be screened out during their evaluation to keep the bank from having to foreclose on them in the future. Although banks want to lend money to these people so that they can make money on the ... ... middle of paper ... ...to these people and to the market would be far less than the long term problems that will be caused by the government or the banks intending to bail them out of the debt they incurred. The government and banks cannot afford to bail out everyone who is in debt so some of them must have their homes foreclosed. The banks cannot wait on for people to repay the loans on several homes at a low interest, long term loan. They simply must foreclose on some of these homes and hope to make some of their money back in the sale of these homes.
The foreclosure crisis has occurred for many reasons. Banks offered subprime loans and teaser rates. They approved under-qualified people to borrow more than they could afford to repay. These borrowers, so desperate to own a home, borrowed over their means, counting on a future and now non-existent upswing of the housing market to allow them opportunities to refinance at lower rates after teaser rates expired. 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.
Simply, the best preventive measure to the foreclosure crisis would have been to not to overextend yourself. The credit phenomenon, of buy now and pay later is one of the major culprits to blame for the current situation. This is a major reason why the country is in such trouble right now. With growing unemployment, many Americans are unable to pay off their current debts. In addition there is no incentive for many homeowners to pay off a mortgage that is greater than the current market value of their home.
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.
The government has to take steps in regulating these types of entities and not be looked upon as the factor of salvation in saving the banks and mortgage industry. The first suggestion to solving the problem of foreclosures would be to lower the mortgage interest to 4% across the board. This would give more people the ability to stay in their homes instead of the adjustable rate mortgage that they are now enduring which ultimately puts them into a situation where they cannot afford their monthly mortgage payments. Banks are greedy and by not giving the homeowner the above chance, they end up taking back a home under foreclosure ruling and in the end, lose out as they do not recoup the value of the home and it puts everyone in a no win situation. Based on mortgage interest rates, many first time home buyers do not realize the impact that the monthly payments will have on their net income.
Foreclosure is the result of mortgage loans being given irresponsibly to people that can’t afford them. Who is it at fault for this? Well the banks giving the loans and the people taking the loans are to blame. They should not have speculated about inflation in the future or their ability to cover those loans. This is why foreclosure and economic crises seem to always coincide; as soon as the economy takes a dive, spending falls, inflation slows, and peoples’ ability to pay their bills and mortgage go out the window.
Solving the foreclosure crisis will not be an easy task. I believe there is no quick fix or sure solution to fix this far-reaching crisis. There are however, steps that every individual involved in the foreclosure crisis can take towards improving the situation. People that the foreclosure crisis does not directly affect should still rethink their lifestyles as well, so that the crisis does not continue to grow. The bail outs given to the banks were a candid approach to preventing the banks from failing, but there were still thousands of Americans failing as well.
Investors should not be enabled to take advantage of this situation right now by going out and paying cash for all these homes from owners in desperate positions. Instead, if all homes are selling at their current val... ... middle of paper ... ...n and on until that card is maxed out, and they no longer have money to buy food, gas, or even pay some bills! Now, we have a new problem. This person’s credit score has dropped, they can no longer borrow, and will begin paying bills late, and their score will drop further, again, and this cycle will continue until the person decides they need to claim bankruptcy or let their home go to foreclosure, or both. This is happening too much all over the U.S. right now, and really all over the world.