The Meltdown Of The Foreclosure Crisis

1094 Words Aug 12th, 2015 5 Pages
Numerous defaults, slump in the value of houses and mortgage finance securities, and shortage of liquidity in banks characterized the real estate and mortgage meltdown in the United States. The relative ease of credit, complexity of loans, and exuberance by people to procure loans fuelled the meltdown (Paul 2010). Sun, Stewart, and Pollard (2010) observe that policymakers, financial manipulators, and market speculators contributed to the meltdown. Competing needs among stakeholders also aggravated the meltdown. Mortgage finance firms, United States government, market investors, homebuyers, and shareholders also contributed towards the worsened meltdown (Sun, Stewart, & Pollard 2010.) The meltdown had disastrous economic and social consequences. Banking and non-banking financial institutions closed down while individual homeowners lost their houses via foreclosure. The fall in house prices resulted in investors incurring substantial losses. Banks closed due to liquidity challenges associated with default from loan borrowers. Closure of mortgage and financial institutions also led to massive unemployment. The meltdown had vital lessons, attributes, and roles to the real estate and mortgage participants.
Paul (2010) observes that easy liquidity coupled with weak regulations on financial institutions promotes speculative and unethical business practices. Prevalence of low-interest rates makes credit affordable by reducing the cost incurred in borrowing money. There is a need to…

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