The foreclosure crisis has had a disastrous impact on the economy and is currently the only sector that has not seen improvement since it was announced that an economic recovery was transpiring. Lax regulation, predatory lenders, an uneducated public and an unaware government have paved the pathway to foreclosure. The American dream includes the notion of homeownership. In pursuit of this dream, questionable business practices and a purchase hungry public caused a financial crisis the solution to the foreclosure crisis is as complex and complicated as the problem itself. . The solutions to the foreclosure crisis means creating a standard for homeownership, structuring adjustable rate mortgages, utilizing current foreclosed properties and modifying current loans.
It must be said the current plan to stimulate housing with the tax credit is a good incentive to boost the market. The current modifications through Fannie Mae and Freddie Mac have helped some. However these current plans limited to those nationalized entities fails in comparison to the overwhelming number of foreclose properties on the market and those that the banks have yet to release. The housing industry need some stability for future assurance that once this crisis is past it is improbable for another one to occur.
First and foremost, there needs to be standards to homeownership approval. While it is true that some marginalized communities do not have the same purchasing powers as others, they are still able to meet minimum standards. Predatory lending was a primary factor in the real estate bubble-lenders underwriting homes to people who could not afford them or maintain them. There should be a set standard to qualifying to purchase a home on a scale based upon the value of the home. The scale should factor in the following: income, job stability, credit history, ability-to-pay, and ability-to-maintain a home based on the price of a home. Income above all else is the key to homeownership. Income determines how much house one can afford, if at all, if an individual is able to upkeep the home, and if and individual can handle a change in the interest’s rate of a home. Having a set standard alleviates consumer confusions and speculations and allows room for educational programs to have clear, correct, and consistent information for the public. This way mortgage companies will all have consistent ways of determining qualified candidates allowing for differential competition and a better rate for the consumer.
Speaking of rates, the crisis has also been due to Adjustable Rate Mortgages (ARM). The step into solving the mortgage crises is having a sliding structure to adjustable rates. Many people were able to maintain payments in the beginning of their home loan and were even able to live off their savings until their interest rate changed exponentially. Any change to a mortgage rate should have at least a 60-day notice so that homeowners are able to prepare for an increase....