It is no secret the foreclosure crisis has played a significant role in the financial meltdown of the past year. The collapse of the housing marketing has brought thousands of families across the country to financial ruin, forcing many out on the streets. Although the common consensus is that something must be done to stabilize the foreclosure crisis, the agreement ends there. Proposed solutions to the foreclosure crisis have drawn controversy from all political affiliations and walks of life. This controversy is largely due to the fact that no one can determine for certain, a single factor that led to the housing market meltdown. By carefully analyzing the factors that potentially caused the foreclosure crisis, one can better determine possible solutions to it.
Perhaps the most recognized cause of the foreclosure is greed on the part of nearly everyone involved in the mortgage and real estate industries. Homes were all too often over valued by appraisers, and then realtors listed them at these outrageous prices. Loans were also offered at higher values by loan officers, so that they could increase their commissions. Homeowners also played a part in their own demise by participating in activities such as lying about income on loan applications in order to qualify for a home that they essentially could not afford. Finally, banks provided sketchy, adjustable rate mortgages to homebuyers based on their ability to pay only the low, “teaser” rate. These factors cumulated, creating an inflated housing market, where many buyers could not actually afford the homes they were sold.
Another cause of this catastrophe lies with the declining value of the dollar, which is decreasing the purchasing power of Americans. As the dollar falls in value, the prices of imported goods, including energy soars, leaving people with less money to pay toward their mortgages. The federal government is also robbing homeowners of their own money through inflation. When borrowing is does not yield enough capital to cover expenses, the government simply prints more money. This process renders each bill increasingly worthless.
The final, and perhaps most influential factor in the foreclosure crisis is the issue of negative equity. Negative equity occurs when a homeowner owes more on their home than it is actually worth. This problem is commonly caused by actions mentioned in the second paragraph, and results in the highest foreclosure rates of any other given reason. In order for the foreclosure crisis to be adequately dealt with, the issue of negative equity must be at the forefront of solution discussions.
Now that one has a clearer idea of the factors that contributed to the housing market meltdown and foreclosure crisis, possible solutions can be discussed. The main goals of proper solution plan include keeping homeowners in their houses, decreasing the supply of houses and raising the demand for them. This can only be done be increasing incentives for people to buy...