It didn’t used to be that way. Listening to the stories of foreclosure evictions provides an eyewitness viewpoint of how it happened. This is important because it provides a background against which to decide solutions. The overhang of foreclosed homes for sale is pummeling home prices and laying waste to entire neighborhoods. In the process, consumer spending has suffered mightily and deepened the recession as Americans have seen the value of their most important assets, their homes, are falling in value.
One of the largest and deepest recessions since the Great Depression has recently frayed the once strong threads of the American economy. Many fingers have been pointed to the housing market as a culprit in the meltdown of the economic balance. in this country, and one element of that market's crash is the foreclosure crisis. High and adjustable interest rates and risky--even misleading-- lending practices both have attributed to this crisis. Causes aside, the question remains: How do we fix the foreclosure crisis?
When it comes to certain obstacles in the processing of loan modifications in general, Delany & Grim (2009) noted that according to Rep. Brad Miller (D-N-C) who “points his finger at securitization” as a major culprit. The fact that mortgages have been securitized identifies a major contributing factor as to why these transactions do not go through as smoothly, and in... ... middle of paper ... ...9). New guideline to take effect in September. Loan modification can hurt your credit. Retrieved on November 15, 2009 from http://www.sun-sentinel.com/business/realestate/condos/sfl-credit-harriet-brackey-081609,0,514033.column Delany, A.
The foreclosure problem today in America is one of the worst economic crisis that has demonised the American economy in recent years. Like any other problem that has a solution, this problem can also be remedied too. To remedy homeowners from foreclosure risks, homeowners can approach this problem by using the structural adjustment mortgage or SAM option, using the home short sale option, or they can just accept the foreclosure of their properties. A homeowner's property will be foreclosed if the homeowner defaults on the monthly mortgage payment. Today, the foreclosure problem is now a epidemic in the American housing economy.
The foreclosure crisis has had a disastrous impact on the economy and is currently the only sector that has not seen improvement since it was announced that an economic recovery was transpiring. Lax regulation, predatory lenders, an uneducated public and an unaware government have paved the pathway to foreclosure. The American dream includes the notion of homeownership. In pursuit of this dream, questionable business practices and a purchase hungry public caused a financial crisis the solution to the foreclosure crisis is as complex and complicated as the problem itself. .
It is imperative that needs come before wants when in a position of foreclosure. Solving the foreclosure crisis is a very big assignment to do but it needs to be handled by the government. The government plays a role in everything including foreclosing homes, so with the government’s help it will improve the foreclosure crisis tremendously. The government can make a system specifically geared toward helping those who are going through the foreclosure crisis. With the help of the government, the rate of the foreclosure crisis will decrease by making it less complicated to pay a mortgage bill.
But it is very hard to say “I can’t afford this house” after the banks or lenders have said that you can. A lot of us were pushed into homes that were too much for us to handle because we were told that it’s no problem. Also interest only payments and balloon payments should not be legal. They only benefit the banks, the home owners always get into trouble with those types of loans. We have many houses in foreclosure that can be prevented; one way is to have the banks be regulated ... ... middle of paper ... ...rom that.
Due to the immense derivative (OTC- Over the Counter) losses banks are simply faced with using taxpayer bailout money to stay afloat and continue manufacturing these exotic instruments that Warren Buffett has labeled as “Weapons of Mass Financial Destruction” . These complex, high risk instruments have accounted for much of the banking system’s profits over the past decade. 3. Currently it is politically unacceptable for interest rates to increase, therefore bank profits from home loans will continue to remain insignificant to improving balance sheet health. Furthermore with the failure of the US Government’s loan modification program, (out of the 4 million homeowners at risk of foreclosure only 30,000 have received assistance) banks will not willingly sacrifice the principle value of the home in order to keep homeowners with negative equity from simply walking away.
Without changes in mortgage lending, any positive steps taken to protect current homeowners will be negated. Two primary methods must be used to help borrowers who are currently in danger of losing their homes. First, refinancing opportunities must be increased, particularly for families who were coerced into borrowing at sub-prime rates. This is a policy area that has already been addressed, but more must be done. Many of the programs previously implemented by state legislatures have used rigid standards of refinancing without regard to the individual’s specific needs.
One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis. (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question about who is actually to assume blame for this financial fiasco.