Foreclosure Crisis
Foreclosure Crisis: What Should the Federal Government Do?
The mortgage crisis we are experiencing in the United States today is already ranking as among the most serious economic events since the Great Depression of the 1930’s. Hardly a day goes by without a story in the newspaper or on the cable news stations reporting about the increase in the number of foreclosures across the United States. The effects of this crisis have spread across all financial markets, where in the end all of us are paying a price for this home mortgage crisis. When the housing market collapsed, so did the availability of credit which our economy depends upon. The home mortgage crisis, the financial crisis and overall economic crisis all need to address by the federal government to bring us out of this recession.
The cause of this mortgage crisis, according to many leading financial experts, was subprime loans and adjustable rate mortgages. These loans encouraged borrowers to assume unaffordable mortgages with the belief they could refinance later with a lower rate. Since 1998 the number of subprime loans borrowers bought homes with was well over seven million. One million of these homes are being lost to foreclosure because homeowners could no longer afford the payment and the loans are now in default. The reason many of these borrowers have entered into foreclosure is a result of these loans. After the initial term has expired, the rate has increased to a much higher rate, therefore leaving a mortgage payment the homeowner cannot afford. These foreclosures are creating an economic tragedy across the nation that is causing the housing and stock markets, the banking industry, and many other job markets severe financial hardships. It is time for the government to intervene into the subprime mortgage crisis and bailout borrowers that are defaulting on their mortgages. I do believe we need the government to step in and assist homeowners that face foreclosure. But the government needs to
The mortgage crisis we are experiencing in the United States today is already ranking as among the most serious economic events since the Great Depression of the 1930’s. Hardly a day goes by without a story in the newspaper or on the cable news stations reporting about the increase in the number of foreclosures across the United States. The effects of this crisis have spread across all financial markets, where in the end all of us are paying a price for this home mortgage crisis. When the housing market collapsed, so did the availability of credit which our economy depends upon. The home mortgage crisis, the financial crisis and overall economic crisis all need to address by the federal government to bring us out of this recession.
The cause of this mortgage crisis, according to many leading financial experts, was subprime loans and adjustable rate mortgages. These loans encouraged borrowers to assume unaffordable mortgages with the belief they could refinance later with a lower rate. Since 1998 the number of subprime loans borrowers bought homes with was well over seven million. One million of these homes are being lost to foreclosure because homeowners could no longer afford the payment and the loans are now in default. The reason many of these borrowers have entered into foreclosure is a result of these loans. After the initial term has expired, the rate has increased to a much higher rate, therefore leaving a mortgage payment the homeowner cannot afford. These foreclosures are creating an economic tragedy across the nation that is causing the housing and stock markets, the banking industry, and many other job markets severe financial hardships. It is time for the government to intervene into the subprime mortgage crisis and bailout borrowers that are defaulting on their mortgages. I do believe we need the government to step in and assist homeowners that face foreclosure. But the government needs to
References: Mark H Adelson, David P Jacob. (2008). The Subprime Problem: Causes and Lessons. Journal of Structured Finance, 14(1), 12-17,4. Kelly D Edmiston, Roger Zalneraitis. (2007). Rising Foreclosures in the United States: A Perfect Storm. Economic Review - Federal Reserve Bank of Kansas City, 92(4), 115-145,4. Tom English, Bill Lathen. (2008). Mortgage Forgiveness Debt Relief Act of 2007 Reduces Negative Tax Consequences from Foreclosures. The CPA Journal, 78(4), 44-47. Steven Seidenberg. (2008). HOMING IN ON FORECLOSURE. ABA Journal, 94(7), 54-59. Clemmitt, M. (2007, November 2). Mortgage crisis. CQ Researcher, 17, 913-936. “Subprime Mortgage Crisis.” Issues & Controversies On File 25 Apr. 2008. Congressional Digest; Dec2007, Vol. 86 Issue 10, p297-300, 4p. Tom English, Bill Lathen. (2008). Mortgage Forgiveness Debt Relief Act of 2007 Reduces Negative Tax Consequences from Foreclosures. The CPA Journal, 78(4), 44-47.