When trying to come up with solutions to a crisis, a good beginning point is to look at how the crisis came about in the first place, then looking to change the influential factors. So what were the factors involved in the foreclosure crisis? It is widely agreed that the increase of subprime loans is largely, if not wholly, to blame. From 1996-2004, 9% of mortgages were subprime. From 2004-2006, this number jumped to 21%- $600 billion or one fifth of the U.S. home loan market now in subprime mortgages. Subprime mortgages are risky by definition, as they are given to borrowers not able to qualify for typical mortgages, generally due to a low credit score. Since the beginning of the crisis, blame has been placed on many people, including subprime lenders for lending so many loans to at risk borrowers, the government for not providing oversight, mortgage brokers for steering potential borrowers to unaffordable loans, as well as borrowers for entering into loan agreements they cannot afford. (wikipedia)
Even if only partial blame can honestly be placed on each of these groups, a change in practice will benefit greatly from each one. The first step in solving this crisis is to make sure that future foreclosures are not occurring. While foreclosure will by no means cease to exist, it should be fully the fault of the homeowner entering into the loan, and not the fault of the mortgage lender whose job it is to give out the loan. If a person is going to be unable to pay back a loan, that loan should not be given to that person, and they should be encouraged to find another home they can afford.
The subprime mortgage market, through a large boom, got way out of hand. Large amounts of people were u...
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... this mess, we must educate our people. This should be the number one goal. Without education, people will not know what they should do in order to help themselves. The government can’t help everyone at the time that they need it, so we must instead prepare ourselves for situations we know will come, such as borrowing money to buy a home. The borrowing process needs to come out from behind the curtain of mystery and become something people understand. In addition, we need to encourage federal regulation of subprime loans, as well as encouragement for our banks and lending institutions to work with individual homeowners to ensure further foreclosures do not occur. This crisis was terrible, and we haven’t seen the full reaches of its effects yet. However, as long as something good comes of it, as a country, we can recover and move on as a stronger and smarter people.
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