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Solving the Foreclosure Crisis

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The solving of this foreclosure crisis that is now plaguing our economy and our people involves examining the past, taking important steps in the present, and changing our policies and our thinking for the future. Perhaps the greatest cause of this incredible problem was our nation’s lack of foresight. The country did not dream that the values of houses and properties would decrease so drastically, and thus we treated the buying and selling of houses as something that was almost insured, stable, and guaranteed to continue to rise when it clearly is not. Many consumers were approved for mortgages with minimal proof of ability to pay it back. The government also bailed out failing banks after it became apparent that their current way of lending money was leading to crisis. This bail out meant that the banks were not forced to confront and fix their own mistakes.

Thus stated, we are now in a crisis, and must make some changes in our mortgage loan policies in order to help the people who cannot pay their monthly mortgages as well as the banks, who are forced to foreclose and sell the houses at a loss. There are three variables that affect a monthly mortgage payment: interest rate, principle, and term. The banks simply cannot lower the principle, because they would lose too much money for loans to be beneficial to their business. Lowering the interest rate, even to zero percent, would not significantly lower the monthly payment, and would also leave the bank making no money on the loan. Thus, the only viable option would be to lengthen the term. As of right now, there are fifteen-year, twenty-year, and thirty-year mortgage plans. I propose a new forty-year mortgage plan be created to increase the term of the loan and thus significant...

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...n support. Income is just as important as good credit when it comes to large loans. Not only do the banks have to tighten their qualifications for loan eligibility, but so do mortgage brokers. Brokers who have patrons that default on their mortgages should have their commissions rescinded by the banks. This would encourage brokers to be honest and forthright with their customers while using all information available to ensure the financial stability of the homebuyer. It may seem unfair that some people are ineligible to receive loans, but it is only realistic. It would be a bad business move for a bank to lend money to a person who cannot pay it back. On the other hand, it would also be a bad business decision for a person to get a loan they cannot pay back. Both banks and homebuyers need to be fully responsible for their borrowing and lending decisions.
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