National Debt & Deficit Spending The Mortgage Crisis
It is clear from the news that this crisis was brought about by an overextension within the mortgage industry. The drive to produce and then package loans for resale was intense. There were those that found ways to sell loans despite clear evidence that the debt service was just not there.
Along the way those that took "per centages" for transactions cleared their deals and moved on.
The first principle that must be addressed is that those families that obtained a loan in good faith should be allowed to find a way to remain in their home.
The second principle is that the mortgage industry must follow rules of good practice to prevent such an overextension. This is serious in that if the federal government is to "bail out" some of this industry then the people of this nation should be assured that such bail out only occurs in those cases when the markets were truly anomalous.
So how does this industry go about determining the "good faith" of a given buyer? …And how does it find out if those processing the loan were at fault?
In situations such as these the owner will always take the "fall" since he was the final decider in t he process and bore the responsibility. But it is clear that some lenders painted rosy pictures knowing that they would only service the loan for a short time.
1st– Any loan documentation that clearly was inaccurate should be carefully scrutinized to find the source.
2nd– If an owner can be shown to be able to meet a reduced loan rate then serious consideration should be given to simply lowering the rate and being done with it.
3rd– In those locales where the potential for massive foreclosures exists, the state governments should step in and find a course of action. Many local governments depend on property taxes to function. Loss of value and empty houses will decimate their tax base without some action of this kind.
The toughest part of this will be finding a method to get on with this quickly and stop the foreclosure process. The longer-term issue of ensuring that industry regulates itself with appropriate practice and reserves should be addressed after these family’s homes are secured.