Clearly we have a mortgage and financial crisis in the country that we need to work together to resolve in a satisfactory manner for all parties involved. Lenders and realtors for years were pressing that the â€œAmerican Dreamâ€ is owning a home in The United States of America. Those same people were also convincing people to buy a home above their financial means. Because of the financial crisis we have banks that have been taken over by the Federal Deposit Insurance Corporation, houses stopped selling, people were laid off in the financial industry, the stock market deteriorated, and realtors were not making any commissions because home sales stopped dead in their tracks. Worst of all people searching for The American Dream are facing foreclosure.
I think that we need to get back to basics as far as the mortgage crisis is concerned. During the last 15-20 years there have been too many mortgages given to people who do not have the credit worthiness nor the ability to pay the mortgage, taxes, and maintenance of the home. Realtors and lenders were so quick to make a sale for the commission that they did not take in to account whether the person buying the home could actually pay for the home in the long run. Those same organizations were quick to push jumbo mortgages to people that clearly did not qualify too.
Realtors were quick to sell homes promoting the approach that bigger is better. They also pushed loans that paid only interest charges and did not include payments for the principle amount. Another approach by the realtors and lenders was the lower mortgage payment with a balloon payment after 5 years. After a low mortgage payment, the homeowners were faced with huge 5-figure balloon payments that they could not pay. The old rule of thumb for a mortgage used to be 2 Â½ times your yearly salary. When houses were selling well they threw that basic rule of thumb out with the baby in the bath water scenario.
When houses were selling well some people took to flipping homes in an effort to make a quick buck. When the houses stopped selling the people flipping the homes got into severe financial straits. Others kept seeing the value of their home rise and took out second mortgages to upgrade their homes, buy automobiles, boats, and to pay for their childrenâ€™s education. When housing values started to fall, they were underwater on the valuation of their homes. With little to no equity in their homes, people started walking away from their financial obligation. If the homeowners had 20-25% equity in their homes, they would have had more of a financial obligation to keep within their means and to pay the mortgage.
If, we were to get back to standard mortgages like a 30 year fixed payment with a 20% down I feel that as a country we could start to get back to sound footing in this county. Another mortgage was the 15-year mortgage where the mortgage payments were larger, but principle was paid off sooner. We need to promote savings and invest in...