Foreclosure Solution Essay

1079 words - 4 pages


The US Census Bureau reports that there is an estimated 51 million housing units in America, with a mortgage balance. According to the Mortgage Bankers Association 10% of all mortgages are behind in payments and an additional 5% are in foreclosure. These figures translate to having over 5 million US mortgages behind on the monthly payment obligations and approximately 2.5 million additional properties are already in foreclosure.
In a recent report from American Title Company, there is an estimated 10.7 million homes with mortgage balances which are greater than the property value. In some areas of the country, the homeowners’ are as much as 65% upside down.
The Mortgage Bankers Association reports that there will be a significant increase in prime-fixed rate mortgage defaults, as the economy struggles with increased number of job losses expected. This does not even address the looming commercial property loans that are delinquent.
Although the mortgage crisis seems to have started with the “sub-prime” loans and the loose lending practices, it has had a much deeper impact on the over-all US and world economy. As people lose their jobs or experience a slowdown in business and decrease in their household incomes, it is harder to meet their financial obligations.
In addition to the tighter lending restrictions and home values dropping, many homeowners that owe more than their homes are worth, have decided to stop paying the mortgage and walk away because they are unable to sell them. In spite of encouragement from the government to work with homeowner and help restructure their mortgages, this is not being done.
In October, 2008, President Obama signed the TARP act. This law was designed to give $700 Billion dollars in funds to banks. This taxpayer money was suppose to be use to keep banks lending and keep the economy working, which was not effective.
I am familiar with this topic because I have watched my parents struggling in the down turn of the economy. My mom and step-dad own a sales business and have several investment homes in California, one of the areas affected the worst.
My parents bought a home in 2005 in La Jolla, so my brother and I could have more opportunities for a better education. When their business went bad in 2008, they had to sell the home, because it became too expensive for them. They had it sold in February 2008, for $2.2 million, but because of the stricter lending guidelines, the buyer’s loan was not funded by the lender. The bank refused to work with my parents on restructuring the loan, which forced my parents to have to give the house back to the bank.
The home was taken back by the bank in November, 2008. That home finally sold to an investor in August 2009 for $925,000.00, nearly $500,000.00 less than what my parents owed and less than 50% of what it was worth 18 month earlier.
Another property that they own, we used as second home and seasonal rental, has a similar story. The...

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