Essay on Solving the Foreclosure Crisis

Essay on Solving the Foreclosure Crisis

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In order to solve the foreclosure crisis it is necessary to understand what caused it and how it developed. After September 11th the government was worried that the already present recession would amplify due to American fear and economic instability. The Bush administration and the Federal Reserve established sharp cuts on interest rates to propel the faltering economy. As a result we saw the lowest interest rates in decades. These low interest rates made it easier and more affordable for people to become homeowners. The demand for houses increased and housing prices skyrocketed faster than people’s income. Thousands of new mortgages were packaged as mortgaged backed securities and CDO’s, which sold to Wall Street for hungry investors foreign and domestic. The problem was that Wall Street was not regulating the loans they bought and everyone was being approved with stated income, non-verified sub prime loans and even loans with negative amortization. Eventually what should have been declined mortgages started to default and everything began to collapse. Today we find ourselves in the troughs of the housing crisis with no solid solution but there is still time to fix the problem.
CURRENT APPROACH:
The current administrations plan has dedicated billions of dollars from the TARP bailout to rework troubled loans . These borrowers can no longer afford their monthly payments. Some owe much more than their home is worth, while others are on the verge of foreclosure. While many different proposals have been designed to alleviate the problem, it is important that government implement solutions that will not only address the current crisis, but that will also prevent it from occurring again. The implementation of more strict underwritin...


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...d typical pitfalls. If students are not provided with a strong understanding of financial management they cannot be expected to understand a similar situation in the future. Financial management is the basis of life and as a society we must focus on educating rather than expecting people to learn this on their own.
CONCLUSION
We cannot expect to fix the problem over night, it will be a slow recovery but we have to start today. Much has been done already and it is clear that it is a complex problem. There needs to be a variety of programs because everyone’s situation is different. The goal has to be keeping people in their homes and to keep properties from sitting empty to avoid the diminished society. It is important to look at present situation but also to focus on the future. We must educate our citizens to prevent an event like this from happening ever again.

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