Market Transparency And Consumer Choice For Housing

1238 words - 5 pages

Since 2006, the number of foreclosures in the housing market has sparked dramatically. This is due to the fact that banks have given out subprime mortgages or interest-only loans to consumers regardless of their credit score. One of the main reasons why banks did not care about consumers’ credit history is because they resold the loans as mortgage-backed securities. This caused the loans to fall into the hands of credit rating companies that rated the loans too positive; thus, these assets were expanded and helped lead to the foreclosure crisis without hurting the banks directly. The goal was that banks lustily sought the big payoff that these mortgages could provide. The mortgages and loans let low-income consumers pay only a low rate of interest back in the first two-three years instead of a principal and interest rate. After two-three years, the interest spikes to a very high rate, but consumers who purchased the loan hoped to sell their home before that happened. As home prices began to drop, they lost the chance to sell their home for a profit and were forced to foreclose; therefore, consumers could not pay them back and so the banks lost money and had to shut down igniting the financial crisis.
In 2009, President Barack Obama took office as President of the United States and directly confronted this crisis by signing two bills: The Helping Families Save their Homes Act and the Fraud Enforcement and Recovery Act. The Helping Families Save their Homes Act allowed bankruptcy courts to adjust or refinance mortgages to more affordable rates without bank interference to help families avoid foreclosure. The Fraud Enforcement and Recovery Act created the financial crisis inquiry commission to provide oversight to financial regulations to ensure the crisis does not repeat itself as well as give prosecutors added authority to combat related threats. So far, as a result, foreclosures are decreasing and the mortgages are becoming more affordable, but job creation and transparency in the market has not occurred, so the crisis continues.
Fortunately, job creation is projected to increase by this spring due to the passing of the American Recovery and Reinvestment Act dubbed the economic stimulus to pull us out of the recession and create jobs; therefore, new job growth will help citizens pay their mortgages and lower foreclosure even more. Despite all of these laws, there still remains one vital part to ensure the stability of our financial system: transparency. Congress has proposed a financial overhaul bill that would enforce new rules and regulation to the industry, but the downfall of it is that it would hinder needed economic growth in a time of feeble recovery. So I propose creating an internet portal administered by the Department of Housing and Urban Development. The government would then require banks to put the address on the top of every loan application to ensure consumer awareness of the address. The portal or website would allow...

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