The foreclosure crisis is like a sore, festering, but treatable with the right financial remedy. Over the past couple of years, little has been done to prevent an economic downturn in the housing industry. With hard work, excellent financial planning, and most importantly, patience, the government and the housing industry will be able to overturn the rising foreclosure rates.
The economic impact of the housing market has varied over the last several years. The housing bubble was created due to the increase in housing prices. The government and private industries allowed housing prices to peak without plausible justification and when the market took a downward spiral, all entities immediately knew where to place the blame. When the housing market was strong, lenders recommended conventional loans and creative financing. This led to disaster because there was little control and oversight. Interest only loans also became popular, but should have never been targeted to low-income homeowners. Adjustable rate mortgages were used, but the buyer’s income does not always steadily increase at the same speed as the inflating mortgage payment. The mortgage industry looked at the short-term effect, but the industry did not take the risk factor into effect over the long-term outlook of the loan.
As a summer intern for the past two years with the Department of Housing and Urban Development, Office of Policy Development and Research, I was able to learn and understand the mission of this agency. I was able to attend congressional hearings, industry meetings and read government guidelines and regulations. I read letters from the industry and homeowners, and I began to better understand the mechanics of the mortgage industry.
Of course, all interested parties have their own ideas on how to end the foreclosure crisis. I feel that a good idea should incorporate these three aspects: common sense, practicality and strong government oversight. By utilizing all three aspects, the federal government will also be able to boost the economy by creating jobs, ending homelessness, and allowing the average citizen to live their American dream.
My recommendation on how to end the foreclosure crisis is to get back to the basics. One of the biggest causes of the foreclosure crisis is homebuyers borrowing money that they cannot pay back. From a political and governmental point of view:
• The government must go back to their primary mission of “affordable housing.” Houses must be adequately priced for the average low- to moderate-income families to afford.
• Over the past two years, there have been four laws enacted – the Economic Stimulus Act of 2008, the Housing and Economic Recovery Act of 2008, the American Recovery and Reinvestment Act of 2009 and the Continuing Resolution of the Department of Interior and Environmental Related Act – that have impacted the mortgage limits. There should be three conforming limits that homebuyers will...