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Useless Solutions to Foreclosure Crisis



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By : Leticia Carvalho    99 or more times read
The government has taken a step to help ease the housing crisis the nation is experiencing today by bringing 30-year mortgage rates down to 4.5 percent. However, this would only be applicable to individuals planning of investing on a new home. Such a scheme can never address the already existing homeowners who are drowning in their mortgages. Neither is it addressing foreclosures at its roots.

The Treasury Department, in the person of Secretary Hank Paulson, has granted over a trillion dollars worth bailout plans for investment firms such as Wall Street and other banking institutions considered major. However, instead of using the amount to lend borrowers, lenders have been keeping the fund rendering it useless. This does not post any form of support to the many troubled homeowners with nearly or even already foreclosed properties.

Experts say the 4.5 percent rate change could attract more interested buyers the housing markets. With this influx in borrowers, home pricing may be brought to a stabilized state. Yet, with the great number of troubled homeowners already existing, the sales activity from the rate change may not be sufficient to overcome the messy situation.

Another posting threat to an increase in foreclosures is the increasing number of job losses. From September to November, the rate of jobless individuals, has already reached 12.8 percent, including laid-off workers and those without a permanent job or just having part-time jobs. The growing percentage of unemployment pre-empts more homeowners having to end up with foreclosures due to lack of source of income to cover for mortgages.

In order to win this battle against foreclosures, FDIC Chair Sheila Bair has proposed some ways that could be taken. First, lenders may help homeowners by modifying interest rates, even the principal, so that monthly payments may be reduced and become relatively more affordable. Another is for the government to refinance, with the help of Federal Housing Association, after acquiring at-risk mortgages. An idea Federal Reserve Chairman Ben Barnanke still opposes saying the solution to this problem does not just take helping those in need.
Leticia Carvalho has been educated in the finer points of the foreclosure market over 5 years.

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