Solution to the Foreclosure Crisis: Lending Laws

1518 WordsJun 18, 20187 Pages
The current foreclosure crisis in America has directly impacted thousands of homeowners who have lost or are losing their homes. It has indirectly affected nearly every American, as it is the underpinning of our current economic recession. In order to resolve this crisis, we first need to understand how we got to this point. With that understanding, we can look for solutions, and then try to prevent this from happening again. In regards to a solution, I have come up with three steps that could be taken to repair our nation’s foreclosure problem. We first need to reduce the risk of the loan to the lender, and then we need to increase the consumer’s buying power, and also work to make the foreclosure process more efficient. To come to any…show more content…
It cannot be prevented in whole, but hopefully it can be minimized. We cannot just tell people they can stay in the home they are losing and the government will make up the difference in their payment. We are the government and we pay for government spending with taxes. That plan would raise taxes and continue to hurt the economy. Instead, there are three steps that could solve this crisis. Step one. As we learned from our example, real estate values are determined by how much of a loan we can qualify for. The current environment has lenders afraid to make most any loans, good or bad. This makes it difficult for the real estate market to stabilize. This needs to stop. We do not want lenders to over qualify people for loans, because that is what got us here in the first place. However, we do want to them to make sensible loans. While lenders are free to make their own loan guidelines, perhaps if loans met sensible, standard qualification requirements, the government could back those loans with mortgage insurance to the lender. This would begin to ease the markets. Step two. Again, from the example, individuals qualify for loans based on their current income and expenses. Often a good part of their expenses are credit card debts. In our failing economy, credit card interest rates have skyrocketed. In many instances, people cannot qualify for a certain loan because their credit card payments and other
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