Solving the Foreclosure Crisis

It gets even worse when the mortgages are collected in one big money making pile at Wall Street. Then no one pays attention to the possible consequences that can occur. Such consequences include how the original borrower’s income will not be able to keep up with rising prices in the market and the chaos that results when big financial firms loosen money lending requirements for the borrower to expand their market. As... ... middle of paper ... ...g made through a prodigious educational foundation. If we want people to cut down on error and learn how to prepare for the future, things like foreclosure will become the easy problems to solve.

Empty houses hurt the community, making it less desirable to live in. Also, when banks loose money from foreclosure, they pass on the expense to new borrowers, making it harder to afford houses in the community. The economy in general is hurt by foreclosure because debt is a commodity which is sold and incorporated into investment packages. The idea is that when the debt is repaid, the interest paid on it is the financial incentive for the investment. With foreclosures, investors loose money and cannot afford further investments.

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.

My sister and her husband had defaulted on their home mortgage leaving them scrambling for a place to live. I saw that greed a huge factor feeding the housing crisis, yet I didn’t know which side was to blame. My sister and brother in-law wanted more house than they could afford, and the bank was willing to lend them more than they should. This crisis sent the government into action to avoid what many were calling the greatest financial crisis of our time. Although many experts suggest an economic depression was imminent without the Troubled Asset Relief Program (TARP) many of the funds were used poorly because the investment banks didn’t acknowledge their risky investments, the funds should have directly helped consumers hurt by the mortgage crisis, government financial relief efforts have had a minimal effect on the economy.

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.

Home foreclosures have been a hot topic in recent months as the economy has been in a serious downfall with a very slow recovery process. There are many different philosophies and many people truly feel that we can recover from this. We can alter the foreclosure status by giving serious consideration to the economic times and the types of mortgages that are available. Buyers must become more educated on the additional costs when getting a mortgage such as taxes, insurance, etc. 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.

In some areas of the country, the homeowners’ are as much as 65% upside down. The Mortgage Bankers Association reports that there will be a significant increase in prime-fixed rate mortgage defaults, as the economy struggles with increased number of job losses expected. This does not even address the looming commercial property loans that are delinquent. Although the mortgage crisis seems to have started with the “sub-prime” loans and the loose lending practices, it has had a much deeper impact on the over-all US and world economy. As people lose their jobs or experience a slowdown in business and decrease in their household incomes, it is harder to meet their financial obligations.

The problem with this system is that when the housing market is down, the banks cannot sell the house, and lose money in the deal. When banks lose too much money, they are either bought out, bailed out, forced to fire employees, or close down completely. As a result of the current economic situation, foreclosure is leading to banks going bankrupt; when the economy is doing better, foreclosure is less of an issue. This is because people have the money to pay their house bill when they have steady jobs with decent hours. This is not to say that the economy causes foreclosure, it just leads to it when people make irresponsible choices.

Foreclosure can be best stopped if these two groups are treated differently. As a generalization, different economic conditions leading to their current position of foreclosure separate these groups. For those who cannot pay the change in their mortgage rate, the burst of the housing created a situation that pushed them towards foreclosure while the economic down turn resulted in the unemployed American’s inability to pay their mortgage. The first group of the current foreclosure dilemma should be dealt with individually while the second facet requires overall economic recovery. The current economic disaster began, in brief summary, as homeowners started to default on their mortgages and the price of homes decreased.

In some cases they would lend money even if the borrower had terrible credit. This has caused corporations like, Country Wide Home Loans, to be bought by other companies. A rather simple solution to this would be to change how “Alt-A” loans are given because these appear to be defaulted on the most. This is partly due to the struggling economy and companies having to cut back and let people go. After this the borrower’s could either, not afford to pay the loan back or felt that they were wasting money by paying it.