Solving the Foreclosure Crisis Essay

1003 Words 5 Pages
The United States is in the middle of a foreclosure problem that needs to be solved and solved quickly. To solve the problem we need to understand foreclosure. Foreclosure is the legal and professional proceeding in which a mortgagee, or other lien holder, usually a lender, obtains a court ordered termination of a mortgagor's equitable right of redemption. The foreclosure process as applied to residential mortgage loans is a bank or other secured creditor selling or repossessing a parcel of real property (immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". Some people say that the government should do something and others say let the economy …show more content…
One solution to the problem is decreasing interest rates of the loans on the houses. To do this the Federal Reserve must increase the money supply. As the money supply increases, interest rates will go down in the loaning money market. The banks need to take this increased money supply and encourage home loans with it and extend the loan collecting time. The lower interest rate will encourage house buyers to start to buy houses again because they will lose as much in the long run. Making the loan collection time longer at a lower interest rate will allow the buyers to slowly pay the house back but not take too much money out of their incomes that would hurt them in the short run. Another solution to the foreclosure problem would be to slow down the production of houses. At its current state, the supply of houses vastly surpasses the demand for houses, which in turn decreases the value of the houses and property. We also need the value of the houses to be higher to encourage some speculation. When house flippers go to buy a house they try to get money out of the house by increasing the value, speculation also does the same. By decreasing the production of houses, you will increase the price of both the house and land and encourage speculation. Some speculation is good but too much is bad. As speculators buy and sell homes the price of the market will reach a new equilibrium, all it will take is time. A

Related Documents