Foreclosure Crisis Essay

The Closing When situations look bleak and there are many people left hungry, tired, and homeless it can be quite easy to point the finger. With the highest amount of foreclosures seen in many years it is quite easy to blame companies, banks, and any other groups of people for yours or other people’s misfortune. No one person or group is to blame for the high foreclosure rate. Everyone involved with the housing market when the market crashed is partly to blame. Whether bank, lender, investor, or homeowner there is plenty of guilt to pass around. Once in the early 2000s the economy became highly at risk to go through a recession after the dotcom bubble burst in 2000 and the terrorist attacks on september 11, 2001. As a response to these “Central

With a booming housing market lenders gave out mortgages to people with poor credit even with the high risk of default that comes with it. With the increased liquidity lenders were willing and ready to take any risk to increase their returns. As said by Gretchen Morganson “ lenders peddled the most abusive and costly loans to unsophisticated, first-time home buyers. Known as “affordability products,” the mortgages generated big commissions up front and were designed to require refinancing later on — which included yet another round of luscious fees for lenders.” Between 2001 and 2005 there was a nearly 300% increase in the amount of subprime loans given out by lenders. During this time there was an increase in demand for mortgages and housing prices did increase dramatically due to low interest rates so lenders probably saw their loans as less risky. Also if some lenders didn’t push these risky loans and recommended more reasonable loans then they would have lost less money and the foreclosure rates most likely would be

Many people made the risky move to buy homes that they could barely afford. Homeowners/buyers were able and willing to go with mortgages that had little to no initial fees hoping to later refinance at lower rates and take equity out of their homes for other spending. Unfortunately for them the housing market crashed and prices fell. Since their was no longer an equity in their homes the homeowners/buyers had to reset their mortgages at higher rates which they couldn’t afford. As mention in the Times article many people couldn’t even sell their homes in an attempt to pay for their loan since they wouldn’t get enough money to cover it from the sale. As a result many people were forced to default on their loans. Even with some lenders selling supposed no risk mortgages many people assumed mortgages that were obviously over their head. If these homeowners/buyers had sought after less risky mortgages, many people would have been in more manageable situations and the rate of foreclosures would be