Solving the Foreclosure Crisis

Then they would be able to regain the money in the house payments, not just give it away making the national dept larger. They would also be able to collect the interest on the mortgage and that could be used to fund a program for people in need of a helping hand due to one of life’s hard times. There are a lot of changes that could be made to help with this problem of foreclosure. But the biggest problem is one that can only be address by the individual, and that is greed. This country has turned on to money hungry sharks and people do not care who they eat to get the money.

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.

This may be true in some cases but it is not fair to penalize the mass of people who are not able to pay their bills on time because of the select few who take advantage of the government. Some effects of the foreclosure crisis are due to the loss of jobs, short pay periods, and interest rates. Job loss and unemployment are the main sources for the cause of the foreclosure crisis. Having a job is one of the main resources for paying a mortgage. So the fewer jobs the economy has the more foreclosures will occur.

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.

Due to the lenders greed, that itch to make a buck, it appeared that anyone and everyone were being approved for a mortgage regardless of their income. Now with the changing economy, layoffs and unemployment, the higher mortgages that were manageable are now unable to be paid and forcing people into foreclosure. Now after the “big guy” got their bail outs, they claim to be able to finance more mortgages and loans in an attempt to regain customers. However, due to the federal funds, there are hefty and strict regulations. The banks are now better off.

Therefore, the obvious solution to these ill repercussions is by keeping people in the homes they currently own and helping prevent foreclosures. My proposal to make this a reality involves three key parties: economically-troubled homeowners, banks, and the federal government. As we all know, the Bush and Obama administrations have recently infused hundreds of billions of dollars into the banking system in order to help troubled banks stay afloat during this hard economic time. The purpose of this influx of money was largely required because banks had lost so much money due to mortgage defaults that they were left with too many foreclosed houses and too few payments on loans. As a result, lending trickled down to a slow stream; consumers now can't get the money they need in order to buy new homes because banks are afraid of more defaults.

If we do not fix what we have done in our past, now, we can never change what we will do in our future. This makes sense at any level of change and development when you take a deeper reasonable look at problems. Recently, I have heard that it is the Realtor’s fault for the soaring prices of homes for sale in many communities. I have also heard that it is the banks fault for lending out more mortgages than they are allowed to, therefore causing an eruption of foreclosed homes. Another great fault was caused by many people who went out and purchased homes when they did not have the actual funds to.

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.

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 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.