Foreclosure is one over arching problem facing the United States of America today with no one perfect solution. Each person in the US suffering from foreclosure has a unique circumstance and situation that has led them to the economic turmoil they face, and that uniqueness therefore requires any solution to the overall issue of foreclosure to be versatile to a plethora of situations. There is not one faultless way to resolve the crisis, but with a combination of different measures, the foreclosure crisis can be slowed.
The foreclosure crisis has become a wave, afflicting neighborhoods of every type. This problem must be addressed before it ruins more families, neighborhoods, and bank accounts. There are several things the United States government can do without notably adding to the ever-increasing budget deficit. In the first section of this essay, I will propose following New York’s Governor David Paterson’s method of dealing with the foreclosure crisis. Following that, I will explore alternatives to the Treasury department’s plan to “shame” lenders into doing a better job as well as ways to deal with the paperwork that confuse so many homeowners.
Foreclosure, the process of claiming the defaulted property to cover the cost of an unpaid debt, has hit America like a tidal wave. Considered to be a crisis and a major factor in the poor economic situation of today, there is no doubt that the current state of the housing market and the influx in foreclosures across the nation has had a dire impact on the American economy since the beginning of 2007. Strategies, policies, action plans, and all other means of organizing a recovery have been attempted, but to no avail. Not even Congressional legislation was able to revive the stalwart economy (although the legislation was not specifically targeted toward foreclosure practices or policies). The plain and simple truth is that no matter what the government tries to do, as long as it is attempting to do something, it is directly harming the economy and subsequent foreclosure practices thereof. The best approach is for the government to back out, to stop the destructive and often contradictory policies that have been put into place, and to allow free enterprise and the private sector to revive the economy. Multiple aspects of the foreclosure system are affected by governmental interference, and only by placing a wall as ironclad as the separation of church and state between the government and the economy can these economic woes be eliminated. This is what caused the crisis, but repairing the crisis is a simple fix. Get the government out, encourage living within one’s means, and allow time for the repairs to work effectively.
The foreclosure crisis has been and will probably always be a problem facing the American population. Even if it has recently begun to be a major problem for the US as well as the global economy, it hasn’t simply sprouted out overnight. A major spark that created this crisis was the housing boom; in fact it was because of this boom that it began to take form. Since people were working for their money in the 90’s, mortgage lenders decided it was the best time for making the most money, to do this they used what is called a subprime mortgage loans to give to everyone who walked into their office, with or without proper qualification (a qualified person being one with an income to debt ratio of around 30 percent). These mortgages consisted of a “fixed” low rate for a number of years and then raised 100 percent or more in the years following, and adding fuel to the fire was the fees which the loan companies imposed on defaulted mortgages, making it almost impossible to afford the monthly payment, and were the main reason for the horrible crisis that would ensue. These homeowners would them take out equity loans in order to make some extra cash in order to keep their heads above water financially, which instead worsened their situation as the housing market started its decline. While the people who had acquired the undesirable loans were suffering enough on their own, banks and other institutions began to add fuel to flames by handing out CDOs, or collateralized debt obligations. These CDOs would contain as many as 100 subprime mortgages and were distributed worldwide to many different investors, in order to cover the debt that homeowner were accumulating. These actions set up a terrible domino effect; the more homeowners went into def...
It is no secret the foreclosure crisis has played a significant role in the financial meltdown of the past year. The collapse of the housing marketing has brought thousands of families across the country to financial ruin, forcing many out on the streets. Although the common consensus is that something must be done to stabilize the foreclosure crisis, the agreement ends there. Proposed solutions to the foreclosure crisis have drawn controversy from all political affiliations and walks of life. This controversy is largely due to the fact that no one can determine for certain, a single factor that led to the housing market meltdown. By carefully analyzing the factors that potentially caused the foreclosure crisis, one can better determine possible solutions to it.
The United States’ foreclosure and housing market problems have been well-documented in recent years. This issue has only been heightened by the 2009 economic downturn. Can the sky-rocketing foreclosure market truly be blamed on the recession, however? Can the issue be pinned down on the masses of people who have lost their occupations? Surely many of the cases can be traced back to these harsh conditions, but many more, most likely, can be attributed to something else. Foreclosures are not a new phenomenon and have been a part of American society for years. So, in order to determine a plan for how best to reduce the number of American families losing their homes, it seems best to look backwards rather than simply at the present.
The financial crisis that is currently affecting the United States of America is the result of several factors, including the growing number of foreclosures, all of which converged into a “perfect storm” of a severe magnitude. The end result was not only the exacerbation of the already looming housing crisis, but the overall bleak outlook on America’s financial system. The integrity of the financial system was put into question along with the future of America’s economy, including its once thriving housing market. In my opinion, I think that like all crises that our great nation has faced, this too shall pass. The question is how quickly will it pass? One of the first steps that we can take toward solving the financial crisis is solving the foreclosure situation that has sprawled across our country. If we can stop the continual insolvency of our nation’s homeowners, then we may be able to reverse the vicious cycle of banks needing to seize a toxic asset, put another loss on the books, packaging this asset either in the form of a bad mortgage or an unwanted property, and putting it on the market so it can collect dust until our economy turns around and an investor purchases it. It is my belief that we can solve the foreclosure calamity by two actions; 1) creating a quasi-governmental agency that will give tax credits to banks entering into a lease-to-buy program for people who are either currently in foreclosure, or those that are about to enter foreclosure and 2) allowing the free market to eventually recoup the losses via the form of investment and spending.
The amount of foreclosures in this country has caused an incredible burden to our economy. It was estimated that in December 2007 foreclosure filings had jumped 97% from the prior year. Since 2006 over 220 mortgage lenders have gone out of business, filed bankruptcy or significantly reduced their lending policies due to fallout from the subprime mortgage crisis (http://EzineArticle.com/?expert=Nick_Adama). The amount of homes in some stage of foreclosure jumped from 0.58% in 2006 to more than 1% in 2007. The foreclosure increase was the first sign of the trouble to come. As of October 2009 it has been shown that higher priced homes are taking a greater share in the foreclosure activity (www.Zillo.com). Some of the states with the highest foreclosure rates in the nation include California, Florida, Michigan, Colorado, Ohio, Georgia, Arizona, Illinois and Indiana (http://EzineArticle.com/?expert=Nick_Adama).
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. . The solutions to the foreclosure crisis means creating a standard for homeownership, structuring adjustable rate mortgages, utilizing current foreclosed properties and modifying current loans.
Even before the implosion of the stock markets in 2008, there were foreboding signs within America’s housing market. Foreclosure signs stood in yards and fliers advertising the sale of foreclosed homes hung from light posts. Homeowners previously enjoying a piece of America’s real estate pie, watching the value of their homes steadily rise, felt the coming recession and were forced to sell their homes to either pay off debts or slow the significant losses to their home equity. Once the stock market crashed, the recession became a depression and America found itself amid a full-blown foreclosure crisis, which coincided with the credit crisis. The value of people’s homes plummeted and unemployment soared, while they were trapped paying astronomical mortgages and home loans from before the destruction. To make matters worse, most banks lying in ruins and those that managed to survive were not lending to those in desperate need. Now that the dust has settled, America finds itself in a housing hole due to poor fiscal planning, and will only dig itself out through the coordinated efforts of banks, housing developers and Congress.