The United States economy has been in trouble for the past couple of years. The foreclosure crisis is a condition that began due to the inability of homeowners to pay their mortgages. Foreclosure is a legal proceeding whereby a lender obtains a legal termination of a debtor’s right to redemption. The foreclosure rates have been increasing for a considerable period and certain steps have been put into place to solve the problem. While the government, financial institutions and the general public are highly aware of the crisis, the steps taken to combat the problem are still not sufficient as the foreclosure rates are still increasing.
In order to understand how to solve the problem, it is important to understand how the problem started and how it escalated into a nationwide nightmare. Several reasons have been stated by analyst but the one reason that is common to all is that greed and corruption are the main culprits. All levels of the mortgage industry were affected by greed due to the housing bubble that began in 2005. People changed their spending habits and everyone wanted to own a house. Appraisers at the time overvalued many houses, agents from financial institutions provided high value loans in order to increase the commission cost and many homeowners lied on application forms in order to qualify for large mortgages they could not repay for a very long time. Banks at the time gave out very huge mortgages with low interest rates basing the suitability of an applicant by the ability to pay the artificially low interest rates and not the real value based on market conditions.
Concerns over oil and gas also resulted in the financial difficulties of many homeowners thus leading to the foreclosure crisis. The rise in need of gas in many countries pushed up the cost of the commodity which in turn caused an increase in various commodities that are passed on to the consumer. Food, transport cost, gasoline and home energy are some of the products that increased in cost due to the oil dilemma. Another cause is the reliance on credit as a means of financing one’s life. Many people have increasingly been addicted on credit cards and other credit facilities causing a strain of the financial capabilities of a person. The application of mortgages and loans increased sharply in the past decade and with many people not meeting their monthly payments, interest rates rose up and people were are less able to pay the periodical amounts required of them. The final cause that will be highlighted is the falling dollar value. This has the effect of reducing the purchasing value of many citizens. Many homeowners lost money in the form of inflation due to the increasing devaluation of the dollar. There are many other numerous reasons given for the crisis all of which worked together to escalate the problem all over the country and also to some countries elsewhere in the world.
The government has instituted a variety of programs to help alleviate the crisis....