How to Solve the Current Foreclosure Crisis; Encourage the Free Market Essay

How to Solve the Current Foreclosure Crisis; Encourage the Free Market Essay

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Our current foreclosure crisis was caused by several different market conditions. The primary reason was the low interest no documentation loans that were given to just about anyone that was breathing. Wall street had a vivacious appetite for these high-risk low documentation loans. At the same time the investors (Wall Street) wanted more of these loans, while property appreciation was soaring thru the roof. On top of this, big insurance companies insured the investor’s money on these high-risk loans.

This rapid property appreciation and abundance of low interest, low or no down, no qualification (not even a social security number) loans fueled a lot of people to try and make money in the real estate market. Armed with low doc, no or low interest loans a large percentage of the population decided to either be a first time homeowner or to become a Real Estate investor. The developers were building as fast as they could but could not keep up with demand. Fueled by these new and creative loans and the soaring price of energy, it would not be long before the effects were felt worldwide.

How to solve our current Foreclosure Crisis:

Part of the problem with the current housing market is the free market has been taken out of the equations. The banks are currently allowed to withhold property from the market to lower the supply. The lower supply is artificially inflating the fair market value of the property. In the past the banks and Savings and Loans were not allowed by federal guidelines to portfolio REO properties.

With all of the bad loans made and the increasing amount of ‘default’ notices, the banks have tightened up their lending guide lines so much that it is making it extremely difficult for people to bor...

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... for the potential buyers but safe for the institution. As long as the program is followed and potential property owners are given all the rules up front and everyone agrees on the terms and conditions of the contract this program will allow millions of new homeowners in this country. The properties will be back in production creating income for the city’s and their infrastructure and tax rolls. We will not have all these boarded up property’s in the larger cities, you will create a since of pride in the neighborhoods because there will OWNERS not just renters and residents of a community will have a stake in the community.

There are some very simple solutions to solve this problem right now if we all pull together and use creativity and common sense to solve it.

In order to solve the Housing Crisis in this country we will all need to work together!

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