The Financial Crisis Caused By The Foreclosure Crisis

The mortgage crisis of 2007 marked catastrophe for millions of homeowners who suffered from foreclosure and short sales. Most of the problems involving the foreclosing of families’ homes could boil down to risky borrowing and lending. Lenders were pushed to ensure families would be eligible for a loan, when in previous years the same families would have been deemed too high-risk to obtain any kind of loan. With the increase in high-risk families obtaining loans, there was a huge increase in home buyers and subsequently a rapid increase in home prices. As a result, prices peaked and then began falling just as fast as they rose. Soon after families began to default on their mortgages forcing them either into foreclosure or short sales. Who was to blame for the risky lending and borrowing that caused the mortgage meltdown? Many might blame the company Fannie Mae and Freddie Mac, but in reality the entire system of buying and selling and free market failed home owners and the housing economy.

During the early 2000 's, the United States housing market experienced growth at an unprecedented rate, leading to historical highs in home ownership. This surge in home buying was the result of multiple illusory financial circumstances which reduced the apparent risk of both lending and receiving loans. However, in 2007, when the upward trend in home values could no longer continue and began to reverse itself, homeowners found themselves owing more than the value of their properties, a trend which lent itself to increased defaults and foreclosures, further reducing the value of homes in a vicious, self-perpetuating cycle. The 2008 crash of the near-$7-billion housing industry dragged down the entire U.S. economy, and by extension, the global economy, with it, therefore having a large part in triggering the global recession of 2008-2012.

The bursting of the housing bubble, known more colloquially as the 2008 mortgage crisis, was preceded by a series of ill-fated circumstances that culminated in what has been considered to be the worst financial downfall since the Great Depression. After experiencing a near-unprecedented increase in housing prices from January 2002 until mid-2006, a phenomenon that was steadily fed by unregulated mortgage practices, the market steadily declined and the prior housing boom subsided as well. When housing prices dropped to about 25 percent below the peak level achieved in 2006 toward the close of 2008, liquidity and capital disappeared from the market.

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.

The real cause of the crisis was not in the housing market but in the misguided monetary policy of the Federal Reserve. While the economy started to downsize in 2008, the Federal Reserve concentrated on solving the housing crisis yet it was just a distraction from the entire thing. By its self, it might have caused a small downfall. As the Federal agency released the financial institutions at a risk from a number of bad mortgages, it disregarded the main cause of a serious crisis (FEDERAL RESERVE BANK of NEW YORK, 2017) A decrease in the Gross Domestic Product (GDP) which entails the total value of all commodities and services produced in the United States, was not adjusted for inflation. Such a decline began the unplanned crisis in mid-2008, and once it happened, the damage had already

I often used to watch a show called “Extreme Makeover” where a team of builders would come to a neighborhood, build a need worthy family a beautiful new home, and then just give it to them. “Wow! What a lucky family,” I would say. “How fortunate.” However, as time went by, that same family would be in the news again. Why? The house was in foreclosure. The people had gone to the bank and taken out a mortgage against the home, then spent all the money they got for it on other things.

According to Desmond, Arleen is not alone in her dilemma. A great many Americans are being evicted in light of the fact that they cannot pay the rent (Desmond, 2016,p 4). Like Arleen, many poor families are spending the majority of their income on rent and utilities. In fact, using estimates from The American Housing Survey (AHS), 1991-2013, Desmond finds that, in America, most poor renting families use over half of their income on housing; and, roughly one quarter spend more than 70% of their income to pay rent and utilities (Desmond, 2016, p 4). Aside from the fact that Arleen’s monthly welfare stipend of $628 has remained stagnate for years, housing costs have soared. Due in part to the foreclosure crisis, and the deluge of millennials into the rental market, the demand for rental stock has risen.(Sisson, 2016). At the same time, escalating building and labor expenses, and declining subsidies, have helped to slow new construction. Thus, demand for rental housing is exceeding supply, resulting in escalating rent prices. Furthermore, the razing of older public housing projects and defunding of government assisted housing has pushed poor families into the private rental market (Sisson, Patrick may 19, 2016). As a result, most poor families in America today live unassisted in the private housing market. In fact, in 2013, 67 percent of poor renter households did not receive federal housing assistance (Desmond, Matthew, 2015). One day, Arleen stopped by the Housing Authority

“Shit happens” is probably what most of these foreclosed homeowners hear after they were forced to leave their comfy home. Even though the economy is unpredictable, not a lot of the victims are satiable by such a vague expression that has caused them to lose their property. It’s a harsh comment, but the economy has turned into something that we have little influence over. One of the worst feelings is having minimal control over the consequences and outcome. Some people are afraid to make the same home-buying decision again as a result, because what’s stopping the economy from taking another shit on them again? The answer is probably nothing, but what are some actions these homeowners can take to ease into settling down in a home again? Foreclosure victims can try to improve their credit score and it could get them that approved private loan in return if needed. Saving money is also a general option for those that tend to spend a lot on luxury retail goods. Another option can be utilizing the rent-to-own option to have that ‘homey’ feeling as soon as possible. Some people can also test their patience and attempt to wait it out until the economy exits the lavatory.

The 'foreclosure crises ' that swept the nation several years ago claiming countless well-to-do homeowners was indeed an undesireable circumstance, which would be the case for any situation similar. Many people not only lost their homes but unfortunantly credit as well. Having a feeling as if one may need to just begin all over again. As options, some may have stayed with family members or friend(s), some may have went into a homeless shelter, some may have found a residence/suite and paid weekly/daily or some may have taken whatever they had left in savings and rented out a place (rather it be via lease or month to month). Options depending on financial income, rather it be the homeowner lost their job and began to live on savings

Since the burst of the housing bubble, foreclosure practices had serious problems which left homeowners and the economy in a tizzy. Losing a home is not only stressful, but it does not bar you from owning again. After going through a foreclosure, a rent-to own is a perfect solution to get back on your feet and onto a road of recovery. By doing so, you are able to receive a monthly rent credit and lock in purchase price on a new home.

In the past years we have seen a huge decline in the housing market. There have been numerous failures with some of our large institutions and we have woken up in a financial work completely different from two years ago. Our current recession was brought on by many things. People have been using their home equity lines as credit cards, corporate greed, bad loans including subprime, and a lot of very bad decisions by consumers. Our government has taken many steps towards trying to improve our current crises. The Tarp program was a last minute quick fix of temporary assets in a last attempt to help failed financial institutions. These funds are a ticking time bomb. It appears there is light at the end of the tunnel and our U shaped

One of the most important things that anyone needs is a place to stay. Having a home or shelter of some sort is a very important factor for living. Which is why the term “homeless” is used when directing towards individuals in poverty. Where am I going with this, one might ask? To elude the fact that staying in a nice decent home is part of living. I am currently a college student myself and know a think or two housing. Having a place to live and making sure that you’re home is collective in price, interest rates and etc. is very important

During the 2008 Great Recession, the financial crisis happened because banks were able to create too much money, way too quickly, and they used it to push up house prices and speculate on financial markets. This was the biggest financial crisis since the Great Depression in the 1930s. The bank was giving out money to the people who couldn't pay it back. There were a lot of subprime loans to those people with poor credit history. Subprime mortgages were often sold to families who didn't even qualify for ordinary home loans. They would sell them to the people who couldn't even get loans and then turn around and sell them to the banks. The banks said that "anyone qualifies for loans". These banks often created a lot of fake inflation.

You always hear people say that greed is the root of all evil, and in the case of the Financial Crisis that is extremely true. Prior to the crisis the housing market was booming and the value of homes were increasing significantly. People were taking out loans and paying mortgages far more often during this time because they were unable to afford the cost of homes due to the large value increase. Financial institutions

The 2008 financial crisis can be traced back to two factor, sub-prime mortgages and debt. Traditionally, it was considered difficult to get a mortgage if you had bad credit or did not have a steady form of income. Lenders did not want to take the risk that you might default on the loan. In the 2000s, investors in the U.S. and abroad looking for a low risk, high return investment started putting their money at the U.S. housing market. The thinking behind this was they could get a better return from the interest rates home owners paid on mortgages, than they could by investing in things like treasury bonds, which were paying extremely low interest. The global investors did not want to buy just individual mortgages. Instead, they bought