The Foreclosure Crisis

Better Essays
The foreclosure crisis is an issue that our country faces in a time of great economic hardship. This hardship is partially due to the foreclosure crisis, creating a vicious cycle that we do not have the funds to break.

Essentially, this crisis was created by an accumulation of several smaller mistakes. Perhaps the greatest mistake was made by the banks and loan companies that extended loans and credit to aspiring homeowners who did not have the means to pay their mortgages. By foolishly allowing people to fall into inescapable debt, the loan companies and banks created a trap for themselves and their customers. Those who could not pay their mortgages were forced to foreclose and give up their houses to the banks. Unfortunately, a bank cannot really do a whole lot with a house. The only way to make such an asset useful to a bank is for the bank to liquidate or sell it. However, not many people have the means to buy a house for its original value due to the excessive amount of people in debt. This means that banks and loan companies have a large amount of houses on their hands with literally nobody to sell them to, thus regaining the money they were not payed by the former homeowners. If the banks are losing money, the economy suffers because now the banks do not have the means to offer loans to those who actually can pay them back. In addition, less and less people have jobs to pay back loans because companies and businesses are cutting back due to loss of profits which stems from lack of purchasing by consumers.

How can we correct this vicious cycle, thus saving the economy and preventing further crises? The government has begun to simply forgive debtors what they owe by repaying banks with tax money. However, th...

... middle of paper ...

...rd solution to the foreclosure crisis would be to sell ownerships of banks to a wealthy corporation or individual with the funds and the means to undergo the profitless period necessary to get banks and the economy as a whole back on their feet. This would require wealthy individuals to simply donate funds to banks without expecting to be repaid. These donations would have to come with a loan-only mandate. Unfortunately, this solution would require generosity which is hard to come by in such large amounts.

In conclusion, the foreclosure crisis cannot easily be solved. It is an intricate mess that requires extraordinary measures to fix. It is important to remember that the situation will get worse before it gets better. We must ensure that banks and loan companies use good financial sense in the future and employ financially responsible loan policies.
Get Access