Three Part Solution To Solving The Foreclosure Crisis

1029 words - 4 pages

Have you looked at the foreclosure listings in your local newspapers lately? I have and

quite honestly it is more than embarrassing. There are tens of thousands of homes foreclosed just

in Wayne County alone. The terrible mortgage crisis is an ongoing real estate crisis and financial

crisis that was triggered by a rise in mortgage foreclosures in the United States. This has exposed

weakness in financial industry regulation and the global financial system. The result has been a

large decline in the capital of many banks and United States government sponsored enterprises.

The crisis began when an increase in loan initiatives such as easy initial terms and a long term

trend of rising housing prices had encouraged borrowers to assume difficult mortgages in the

belief they would be able to quickly refinance at more favorable terms. However, once interest

rates began to rise and housing prices started to drop in the United States, refinancing became

more difficult. The United States needs to bounce back from this foreclosure crisis and it needs

to happen quickly. There are three parts of my solution which consist of a limit on adjustable rate

mortgages (ARM). Another is a law that requires banks and lenders to use a more complex

background check for potential home buyers. Lastly, people that become unemployed after

having a stable job for a period of time should have a reduced interest rate for a limited amount

of months.

Banks and Lenders use the adjustable rate mortgage because it seems like a better,

cheaper plan than the other mortgage rates. At first the adjustable rate mortgage does seem better

and cheaper until a few years later. The adjustable rate mortgage increases by an overwhelming
percent after the first few years of owning a home. This makes it harder for homeowners to pay

the payments on the house because the mortgage rate increases so much that the homeowners

cannot pay the payments. When the homeowners cannot pay their mortgage, the home goes into

foreclosure and the residents inside of the home are forced to leave the home. This has to come to

a stop or at least become more reliable for homeowners. My solution proposes that their should

be a limit on adjustable rate mortgages. The banks and lenders know how much the homeowners

can pay on their payments before approving their loan. So the mortgage rate should be no more

than nine percent, but no less than two percent. This will allow the homeowners to be able to

pay all of the payments on time and will allow the homeowners to keep their homes as well.

The Legislative Branch should also pass a law that requires a more complex background

check by banks and lenders on potential home buyers. The complex background check will

provide the banks and lenders the information that will provide how much the mortgage rate can

be with the homeowners being able to pay the...

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