The recession that started in December 2007 and has lasted through 2009 has been the worst economic downturn of my lifetime, and after listening to my parents and grandparents I realize this could be one of the worst recessions in generations. We can all acknowledge that this period of time since 2007 has been the most difficult period in generations for so many middle class Americans who thought they were secure or within reach of the American dream to own their own homes. I have heard people on TV and on the national stage debate the reasons and the impact of the foreclosure crisis on the economy. This debate has been frustrating because people focus too much on arguing who is right or who was wrong; some people claim the foreclosure crisis is from a lack of oversight over mortgage companies that should have been regulated more by the government in how they make their loans. Other people argue that foreclosures came from mortgages that were easy to get for people that could not afford a house to begin with. Looking back is good if it helps us learn for the future, but with a foreclosure crisis going full force right now, the most important thing for our nation to do is rise above these debates while people are suffering through the crisis and losing their homes. We need to develop solutions in a morally responsible manner and realize the buyer and the lender both have to act responsibly.
Consistent with this approach in creating new solutions would be to give more support to policies and laws that support accurate accountability where lenders are accountable for the money they lend out in a responsible manner. Companies such as AIG were allowed to perform “swaps” or essentially bet on loans. When boiled down, these swaps are basically just insurance for banks on loans and mortgages they give out. So if the customer does not pay back the loan at all, the bank doesn’t get hurt at all. This is a problem because now the banks have little incentive to give people loans that they can pay back. So they will just give them higher loans, because if they can’t pay them back, the bank doesn’t get hurt. Whoever originally gives out the money must be held accountable for its repayment; otherwise there is a serious conflict of interest.
We need to design a structure that is more morals based, motivating lenders to care more about their customers’ long term prospects of staying in a home, rather than just viewing them as loans or profit. One way this could be accomplished is a sort of rating system that rates lenders based on how much they care about their consumers, and what percentage of their customers are able to pay their loans back. Then, this list could recommend the most moral lenders to customers. If customers could pay attention to this list, then lenders would be motivated to be on it, so they would work hard to be morally sound.
Another way to help the buyers would be for the banks to conduct counseling sessions with the homeowners, not...