The American Dream Of Homeownership

For many years, the idea that ones’ home being the largest investment was said as a complete sentence when in fact, it was only an incomplete sentence. Any duly licensed financial planner would finish that sentence by saying all investments are subject to market conditions, the value that investment could increase or decrease and other similar cautionary statements that their attorneys wrote to protect them. The American public only heard that their home was the largest investment and had never experienced, nor had their parents seen the value of their personal homes drop like they did in the past few years. They had never experienced the financial pain and although only a few years have passed, many have forgotten and are ready to jump right back into homeownership.

Too many Americans have fallen victim to the crisis that has become the norm for our citizens these days. Lenders no longer want to work with individuals who have gone through the foreclosure process and for many it is not only their homes they lose. Some have lost their jobs and/or families, others fall into a deep depression and worst of all some have taken their own lives.

Home ownership is the American dream! It is one of the most costly purchases an individual or family can make in their lifetime. Some people save until they have cash to purchase however, many people borrow money from a bank or lending institution; when a person borrows money to purchase a home the loan is called a mortgage. The lender is called the mortgagee and the borrower is called the mortgagor; banks have several different types of mortgages: fixed rate mortgage, adjustable rate mortgage, investment mortgage and much more. Borrowers have to undergo the lender underwriting process to show financial capability of repaying the mortgage (Makarov & Plantin, 2013). In this article I will use a fictitious person named “Julianna,” she is in the process of buying her first home at age 30; I will be her lender and will use mathematical procedures to find out what is her down payment, principle, installment payment, points (closing cost), mortgage maturity value and total interest paid.

The housing crisis of the late 2000s rocked the economy and changed the landscape of the real estate business for years to come. Decades of people purchasing houses unfordable houses and properties with lenient loans policies led to a collective housing bubble. When the banking system faltered and the economy wilted, interest rates were raised, mortgages increased, and people lost their jobs amidst the chaos. This all culminated in tens of thousands of American losing their houses to foreclosures and short sales, as they could no longer afford the mortgage payments on their homes. The United States entered a recession and homeownership no longer appeared to be a feasible goal as many questioned whether the country could continue to support a middle-class. Former home owners became renters and in some cases homeless as the American Dream was delayed with no foreseeable return. While the future of the economy looked bleak, conditions gradually improved. American citizens regained their jobs, the United States government bailed out the banking industry, and regulations were put in place to deter such events as the mortgage crash from ever taking place again. The path to homeowner ship has been forever altered, as loans in general are now more difficult to acquire and can be accompanied by a substantial down payment.

In conclusion, homeownership in the United States have decline over the past years even being the lowest it has ever been, but has had an improving and strong market beginning in 2012 after a 27% decline from the 2006 peak, and the increasing homeownership rate is a worthwhile policy to allow the United State economy to

America is seen as the land of opportunity in that there are endless possibilities for an individual. In this land of opportunity, Americans strive to obtain the ideal known as the American dream. The American Dream is seen as the accomplishment of an ambition achieved while challenged by adversity.1 Americans often associate this success with the ownership of a home. The home is not simply a place of basic protection; there is a much deeper connection to the individual. Ownership of a home grants freedom and security that establishes a sense permanency for the individual. In contrast, renting a living space possesses a semblance of instability and dependence.2 The desire to improve ones’ position in life inspires one to

The regulation that I have chosen for this paper is amendment in the Regulation X i.e. “Real Estate Settlement Procedures Act” and Regulation Z which is for “Truth in Lending”, for establishing the new disclosure requirements and forms in Regulation Z for the most closed-end consumer credit transactions secured by the real property. This regulation is controlled by the Bureau of Consumer Financial Protection. The role of the Consumer Financial Protection Bureau (CFPB) is to provide consumers information related to the terms of their agreements with financial companies during their application for a mortgage, choosing among credit cards, or using any number of other consumer financial products. The mortgage market is the single largest market for the consumer of financial products and the services in the United States, with approximately $10.4 trillion in loans outstanding. Since last decade, market went through an unprecedented cycle of the expansion and the contraction that was fuelled in the part by securitization of mortgages and the creation of increasingly sophisticated derivative products. This led to the collapse of financial system in 2008 and sparked the most severe recession in United States.

     What is happening is that there are some unethical lending practices that are threatening the housing industry as a whole. The concern involves the practices of some sub-prime lenders. These practices are considered to be “predatory” on consumers. Sub-prime lenders offer home loans (Equity Loans & 1st Time Home Purchase Loans) to moderate to lower income families. These clients are considered to be high credit risk borrowers, also know as B-C-D credit clients. Interest rates and other loan terms generally cost more than those paid by clients served by prime lenders with better credit records (A credit clients). Sub-prime borrowers end up paying more simply because the risk of loan repayment is fundamentally higher than that of a prime market borrower.

In 2008 the real estate market crashed because of the Graham-Leach-Bliley Act and Commodities Futures Modernization Act, which led to shady mortgage lending or “liar loans” (Hartman). The loans primarily approved for lower income and middle class borrowers with little income or no job income verification, which lead to many buyers purchasing homes they could not afford because everyone wants a piece of the American dream; homeownership. Because of “reckless lending to lower- and middle-income borrowers who could not afford to repay their loans many of the home buyers lost everything when the market collapsed” (Tankersley 3). Homeowners often continued to live in their houses for months or years without paying any

The Federal Government needs to make sure to enforce strict guidelines on who can and cannot be accepted for a home loan, and not allow big investors to borrow excessive money at low interest rates to inflate the investor’s financial advantage. If the government starts allowing lower standards on mortgages, we are going to end up in the same catastrophe once again. In an article written by U.S. News and World Reports entitled Should the Federal Government Provide Support to the Mortgage Market?, the Federal government and the President attempted to get involved with the housing market. The passage implicated that Obama wanted to do away with federally funded conglomerates Fannie Mae and Freddie Mac and implement another type of government assisted program ("Should the Federal Government"). The program would prevent the mistakes made by Fannie and Freddie which created the original “housing bubble burst” ("Should the Federal Government"). One of the Senate bills suggests the government create “a new agency, the Federal Mortgage Insurance Corporation to replace Fannie and Freddie” ("Should the Federal

In the lead up to the current recession, when the real estate market began to fall, there were so many investors shorting stocks and securitized mortgage packages that were already falling, that the market simply fell further. There were no buyers at the bottom, and the professional investors made millions off of the losses of others. Beyond this, there was no real federal regulation for securitized mortgages, since there was no real way to gauge the mathematical risk of any given package. This allowed the investors to take advantage of the system and to short loans on real people’s homes. Once these securities were worthless, many of the homebuyer’s defaulted on their mortgages and were left penniless. No matter from which angle this crisis is looked at, the blame rests squarely with the managers who began the entire cycle, the ones who pursued the securitization of mortgages. Their incompetence not only led to the losses of Americans who have never invested in the stock market, but to losses for their shareholders.

The financial crisis emerged because of an excessive deregulation of business operation of financial institutions and of abusing the securitization mechanism in the absence of clearly defined rules to regulate this area in the American mortgage market (Krstić, Jemović, & Radojičić, 2013). Deregulation gives larger banks the opportunity to loosen underwriting lender guidelines and generate increase opportunity for homeownership (Kroszner & Strahan, 2013). After deregulation, banks utilized many versions of mortgage loans. Mortgage loans such as subprime and Alternative-A paper loans became available for borrowers challenged to find mortgage lenders before deregulation (Elbarouki, 2016; Palmer, 2015). The housing market has been severely affected by fluctuating interest rates and the requirement of large down payment (Follain, & Giertz, 2013). The subprime lending crisis has taken a toll on the nation’s economy since 2007. Individuals who lacked sufficient credit ratings or down payments resorted to subprime mortgages to finance their homes Defaults on subprime and other mortgages precipitated the foreclosure crisis, which contributed to the recent recession and national financial crisis (Odetunde, 2015). Subprime mortgages were appropriate for borrowers with substandard credit and Alternate-A paper loans were

Homeownership is the American dream and the U.S. Department of Veteran Affairs (VA) makes it possible for veterans, and eligible spouses who serve finance the purchase of their own homes. With the help of the VA, banks and other mortgagees are able to provide favorable home loans with a comparable lower interest rate, as well as, VA home loans zero down in Ocala, Florida. These loans are flexible and can be used to purchase your own home or to repair, build, adapt or retain your personal property. The term veteran refers to active duty service personnel, certain members of the Selected Reserve and spouses of a certain category. This means that residents in Ocala, Florida who are categorized as veterans should take advantage of a VA home loan if homeownership is in your near future.

The information has already been provided that sense the the housing market crashed people in general have been apprehensive to purchase homes. But even more so to the new generation of millennials. And even current events are shaping the future of home ownership, like the new revision on taxes. So does most certainly understandable to why people would be so wary of the dangers, and struggles of buying a home. And how it might be all together easier not to buy one.

In relation to the increase in house’s price, the rise of financial agreements such as mortgage-backed securities (MBS) and collateralized debt obligations (CDO) encouraged investors to invest in the U.S housing market (Krugman, 2009). When housing price declined in the U.S, many financial institutions that borrowed and invested in subprime mortgage reported losses. In addition, the fall of housing price resulted in default and foreclosure and that began to exhaust consumer’s wealth and