Solving the Foreclosure Crisis While Protecting the Free Market Economy

Rampant housing foreclosure in the United States is the direct result of a socioeconomic Katrina. Housing prices increased at monumental rates; home buyers purchased more expensive homes than they could afford, and at times, mortgage applicants falsified loan information to obtain a home loan. Further, to boost homeownership statistics and thus, provide citizens with the perception of prosperity, the federal government urged lenders to extend loans to high risk consumers. Brokers were encouraged to process as many loans as possible to reap the commissions for every home sale. When housing prices plummeted and people began to lose their jobs, the resulting housing foreclosure crisis devastated homeowners and families throughout the United States. The social aspect of this economic disposition calls for more than a simple economic solution. The only way to fix the foreclosure crisis is to provide limited economic assistance to impacted consumers, except banks and consumers to be more responsible with lending and borrowing decisions and allow the free market to self correct the housing and lending industry.

The only we action should take, is to temporarily protect consumers from foreclosure caused by the inability to make a mortgage payment. To do this, our government will need to assume responsibility for the principle portion of the loan and rent the home back to the family in danger of foreclosure. The rent would be based on the principle outstanding mortgage, multiplied by a flat interest rate. The rental payment will provide the bank with an interest only cash flow. When the family has a more stabilized economic situation, the bank and the consumer can then renegotiate the mortgage on the house. To avoid a future f...

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...on and deflation. This constant pattern is the fix for our free market economy and should never be changed.

As described above, the current foreclosure crisis is a complex matter with both social and economic factors.We need to spend less time on repairing a “fixed” system and focus on assisting those who are in jeopardy of losing their homes. Lending institutions need to take steps to make better lending decisions and lenders should take steps to develop relationships with their consumers, whereby consumers consider them trusted advisors. Consumers too need to make better borrowing decisions and take personal responsibility to do their best to ensure that they protect themselves from a downturn in the economy. After all of this is accomplished, the free market with its perpetual ebb and flow will correct the mortgage and lending industries all on its own.