Solving the Foreclosure Crisis

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Economic missteps of various forms have pushed the United States and the entire world into one of the worst recessions in history. One symptom of that recession has been an onslaught of home foreclosures, the problem that this essay will address. There is no question that these foreclosures are detrimental to the health of the overall economy, but solving the problem solicits a variety of opinions.

In the October 2009 COP report, An Assessment of Foreclosure Mitigation Efforts After Six Months [1], it is shown that the cause of home foreclosures has changed somewhat since their initial report in March. At the beginning of the foreclosure crisis, many of the problems were driven by the unwise handling of various situations and financial instruments by both borrowers and lenders. At this time, most of the solutions focused on finding ways to modify existing mortgages to make them affordable for the homeowners and mitigate the results of the imprudent decisions that had been made. Now, the leading cause of foreclosure is the loss of employment and is happening to both prime and sub-prime borrowers.

According to the Congressional Oversight Panel's March 2009 report, Foreclosure Crisis: Working Toward a Solution [2], any viable solution to the foreclosure crisis must have several components. It must:

• Result in modifications that create affordable monthly payments

• Deal with negative equity

• Address junior mortgages

• Overcome obstacles in existing pooling and servicing agreements that may prevent modifications

• Counteract mortgage servicer incentives not to engage in modifications

• Provide adequate outreach to homeowners

• Be quickly scalable to deal with millions of mortgages

• Encourage widespread participation by...

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...olve other pressing problems like the impending water crisis by building relevant items like giant reservoirs or nationwide pipelines.

Overall, solving a problem as complex as the foreclosure crisis is not a simple task, but important progress can be made if wise decisions are implemented. However, there is always a danger inherent in all change which is that the effects of the change might be more disastrous than the initial problem. Thus, as is accomplished in this solution, any changes to be made should be free from detrimental side effects or reduced freedoms. With the simple steps of changing the rules for conforming loans, administering a competency exam for borrowers, and spurring job growth through high profile public works projects the foreclosure crisis can be solved and America will be left with a future that everyone can be proud to leave to posterity.

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