Contributors to the Foreclosure Crisis and Steps to Foreclosure Recovery

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The current real estate strife and “market meltdown” had a number of contributors; from the over-speculation in “bubble” markets like Florida and Nevada to Adjustable Rate Mortgages (ARMs) that attracted families not prepared to support the sudden increase in monthly payments. To repair the current market, give solace to homeowners not yet in foreclosure, and keep banks whole and prevent further closings takes an understanding of the factors that led to our current state, a plan to get us out of it, and a means to prevent its reoccurrence.

This truly was the “perfect storm” of economic failures, with culpability on all sides of the market. Many blame those who took out ARM mortgages who could not afford the increased payments after 3,
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To prevent unfair consumer practices, these loans would have set rates that banks could charge based on the length of the loan and amount. Banks would not be required to take this government loan, but those that did would have to abide by set government interest rates.

This type of loans could be granted to new homeowners not in default, but with caution. To prevent the US government from entering the saving and loan business, only loans made before a certain point would obligate the government to loan banks prepaid mortgage funds to ensure that government assistance went to homeowners in real need.

When compared with curbing over-speculation and preventing the proliferation of toxic assets, the above seems much easier. Besides our hesitancy with less developed markets, owed in part to the recent collapse, there is little that can be done (or really, that should be done) to set the price of a home or prevent an investor from purchasing a potentially risky stock or security. This is an area in which we should tread lightly, but also make consumers aware of the potential risk in certain markets.

I propose an Investment Risk rating system by which investment firms, banks, and financial products are measured according to the amount of risk, including factors such as potentially toxic assets. This could be part of the existing annual audit process and provide consumers with easily understandable metrics by which all investments could be judged. This would

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