The American Dream is always becoming bigger and bigger. Since the end of World War II the United States has been obsessed with suburbia and America’s people have been building and borrowing ever more. The early years of this decade may have paved the way for every family to get a piece of the American Dream, but as we can all see, in the past couple of years, the financing options that enabled just about everyone to own a home were not options that were good for those consumers or the United States’ economy. Federal Regulation and more education are the only way to be politically correct while preventing people from buying more home than they can afford and educate them so they may make the smart choice in purchasing a home. The …show more content…
These strict income to debt ratios may seem unfair to a consumer looking for that “American Dream.” Consumers would notice an extremely small scope of home choices especially with a low income. However unfair it may be to a consumer, it is a policy that will protect both the lender and consumer. The consumer will also benefit from a home that they know they can afford every month, with money left over each month to spend (Vintage New Media). Going beyond qualifications for borrowers, the products lenders have available need to be evaluated. Adjustable rate mortgages provide a borrower with a low initial interest rate in the initial period, which is an advantage over a fixed rate loan. Disadvantages of an adjustable rate mortgage however, have become obvious over the past years. People are allowed to purchase homes that are larger and more expensive than what they could afford with a fixed rate loan. Interest rate increases may increase depending on the state of the economy, and monthly payments will most likely increase beyond the borrowers ability to pay (Bank of America). Therefore, these loans need to be evaluated in their terms and conditions regarding the borrower. With such an unstable loan, it would be smart for the lender to avoid selling these loans to high risk consumers. However, during the “hay day” (2003-2005) of sub-prime lending, these loans were often sold to consumers with FICO scores below 620 (NPR). So lenders themselves are at fault for
As we now know, the U.S. economy, the middle class, and its job growth was damaged by the overwhelming collapse of Wall Street, which was triggered by the downfall of the housing market and sub-prime loan defaults. One of the main things that need to be addressed in our economy today is the housing market and making sure that our banks and credit unions are not allowing people who do not have the necessary income to pay their mortgage disbursements. In an article entitled Thinking outside the Housing Bubble, the author John Vogel remarks how the economy is generally supported by the housing market. Vogel states:
“Growing income inequality in the United States stemming from unequal access to quality education led to political pressure for more housing credit. This pressure created a serious fault line that led to distorted lending in the financial sector.” (Rajan,2010, P.54)
Many consumers who are looking to purchase a home again with the recovery of the housing market may not have the ideal financial background to get started. In order to discover whether or not they qualify, these potential borrowers should first consult with a mortgage professional, such as a
More whites can own a home compared to people from other minorities. “Statistics indicate that 73% of whites own homes compared to 45% African Americans” (McKernan and Ratcliffe, 2). Whites are more likely to receive prime mortgages compared to black. Home ownership is a large determinant of wealth. The government provides subsidies for home ownership, but such subsidies only benefit the rich because they are based on income. The rich prosper from mortgage interest deduction benefits. There is a clear disparity and a wide gap in home values between white and black neighborhoods. Unfortunately, this is mostly caused by policy. The National Housing Act of 1934 marked the black neighborhoods as credit risks. Such neighborhoods have high poverty rates and declining infrastructure. People have maintained this perception since that time. “It would be possible to reduce the wealth gap by offering tax credits to low-income households and removal of other barriers that prevent home ownership” (McKernan and Ratcliffe, 2). At the same time, it is important to make the mortgage lending and relief programs transparent and fair. Institutionalized discrimination and negative stereotypes should be obsolete in the pursuit of
The mortgage crisis we are experiencing in the United States today is already ranking as among the most serious economic events since the Great Depression of the 1930’s. Hardly a day goes by without a story in the newspaper or on the cable news stations reporting about the increase in the number of foreclosures across the United States. The effects of this crisis have spread across all financial markets, where in the end all of us are paying a price for this home mortgage crisis. When the housing market collapsed, so did the availability of credit which our economy depends upon. The home mortgage crisis, the financial crisis and overall economic crisis all need to address by the
The foreclosure crisis in America has impacted everyone- even those who don’t own homes. Our nation is currently struggling with high unemployment, a relatively illiquid credit market, and a deficit that raises serious concerns about the value of the US Dollar in the not too distant future. With interest rates already at historic lows and the government pursuing an unprecedented policy of quantitative monetary easing, options for government intervention are limited. While there is no simple solution to this problem, I think that we must look at the reasons the housing market went into crisis, and based on that develop a regulatory system that will allow us to avoid another situation like this in the future. If Americans believe
There were many people affected by the most recent recession and therefore forced to foreclose on their homes. Losing a home due to foreclosure leaves a big black eye on an individual’s credit score and forces these people to be patient until they are approved to rejoin the housing market. “Boomerang buyers” are a group of potential homeowners who are re-entering the housing market after losing their homes due to foreclosure.
The foreclosure/housing market crash several years ago affected a vast amount of families across the country. Unfortunately, my family was also affected. Thankfully, my parents have not gone through foreclosure yet, but we are all stuck in a house because we are “underwater” (owe more than it is worth). This crisis directly and indirectly affected so many, but thankfully we are all starting to bounce back.
There are many reasons a person can end up in foreclosure. Many people were victims of predatory lenders, whom they trusted to have their best interests at heart. These lenders misled homebuyers and helped them achieve loans for purchases that were beyond their budget.
FDR’s affordable housing initiative was responsible for the rapid expansion of home ownership throughout the United States (Allen and Barth, 2012). This was accomplished in part through the creation of The Federal National Mortgage Association, which provided affordable low down payment mortgages extended over a 30-year period of time. Over the past several decades the United States economic policy has been to encourage home ownership (Bluhm, Overbeck and Wagner, 2010).
When the real estate value began to drop in 2007, hundreds of thousands of Americans were evicted from their homes through foreclosure or short sales; giving way to one of the deepest economic collapses in more than half a century. Now a large amount of borrowers are starting to bounce back. Like a boomerang, these battered borrowers are re-entering the home market after years of renting, nursing their credit and saving enough to buy again; but in a economy like this that we could say now is sort of “stable” is it smart going all in on another mortgage or better going with the “rent-to-own”.
Being that I only saw this scholarship opportunity a short while ago and partaking in a busy day today, I will energize you with one of my ideas that will not require much detail. However, I do have several that are sure to work. My time starts now at 7:30 p.m. Yes, the foreclosure catastrophe involuntary, caused a multitude of homeowners to abandon their homes when the economy plummeted to its lowest point. Even with the rent to own options, it is not usually a realistic adventure. Renters still have the mindset of a boarder and are dependent upon the property manager to take care of practically all things associated with the property, with the exception of landscaping. “Translated” cutting the grass. Renters must to be educated in what goes with property ownership before even looking at to occupy for lease purposes. It cannot be cultured in a single setting, but in a given sequence of empowerment classes throughout the duration of the lease agreement. Yet, there are other options in which present tenants can be converted back into viable homeowners again. Due to foreclosures, the bank has an abundance of housing inventory and has the upper hand in creative options to re-introduce potential boomerang buyers. When I say creative options, I am referring to resources. While foreclosure is not always a simple black and white procedure, banks are a great place to start. Regardless to the foreclosure process implemented for each state, the same concept can be adopted to own
The American homeowners have been forced to accept these adjustable rate loans in order to lower their monthly payment by a few hundred dollars. In the long-term, most end up refinancing down the line and losing all the money they saved monthly on additional closing costs, to modify an adjustable interest rate loan.
National Homeownership Strategy Social policy of a greatly increased percentage of homeownership adept with relax lending standards. The highly leveraged government body of Fannie, Freddie, and FHA were the commander in driving these changes throughout mortgage finance industry. Fannie and Freddie are willing and able partners buying them senatorial protection. Rest of the industry doesn’t need to be asked twice it will sell more homes and expand lending. The National Homeownership Strategy end in the solid elimination of down payments. The capacity of home purchase loans with down payments of 3 percent or less regularly increased from 0.5 percent in 1990 to 40 percent
When we think of the “American Dream,” one of the components that we dream about is owning a home. But the value of real estate has been climbing – and in some cases, faster than the median household income of most Americans. This places real estate ownership out of the hands of more and more people, and makes buying a home more difficult. This infographic catalogs the listing price of real estate per square foot in cities across America. It reviews every state and looks at one to three cities in each one. Along with the list price of real estate, it compares those prices to the national average – so you can see that in some cities, it\'s two, three, four, or even twelve times as expensive as the national average to own property. To give you