Introduction
Democrats have long argued for lending policies that allow easier mortgage credit to low-income families to help remove an important obstacle to achieving financial security. Republicans tend to frame their support for homeownership as part of their drive to create an "ownership society" in which everyone owns a piece of the country and can share in its prosperity. The result has been a range of policies that promote homeownership while generally neglecting renters.
Democrats have long argued for lending policies that allow easier mortgage credit to low-income families to help remove an important obstacle to achieving financial security. Republicans tend to frame their support for homeownership as part of their drive to create an "ownership society" in which everyone owns a piece of the country and can share in its prosperity. The result has been a range of policies that promote homeownership while generally neglecting renters.
In the dynamic U.S. economy, where job security is a relic of the past, workers frequently have to move to maintain or advance their careers. Since large transaction costs (typically close to 10 percent of the sale price) are associated with buying and selling a home, it generally does not make sense for someone to buy a home unless he or she can stay in it for a substantial period. The situation is even worse if the home purchase price was driven up in a speculative bubble, as was the case with many homes in recent years. Not only will some home buyers incur large transaction costs, but in today's market they are also likely to be forced to sell their houses for less than they paid.
While there are losers in this story, there are winners too. The transaction costs borne by home buyers are income for those in the real estate industry. A serious housing policy should recognize that renting can be a better option for many Americans, especially for tens of millions of families with low and moderate incomes. The country cannot allow its housing policy to be determined by ideology or the interest groups that benefit from this ideology.
Facts
· The subprime mortgage crisis, a sharp rise in home foreclosures, started in the United States in late 2006 and became a global financial crisis during 2007 and 2008. House prices fell at their fastest pace in 13 years in February 2008.
· Loan incentives and a long-term trend of rising housing prices encouraged borrowers to assume mortgages, believing they would be able to refinance at more favorable terms later.
· Major banks and other financial institutions around the world have reported losses of approximately U.S. $140 billion as of February 2008.
· The subprime crisis also placed downward pressure on economic growth on economies around the world.
· The downturn in the housing market has resulted in a significant decline in new home construction and housing prices.
· The risks to the broader economy created by the housing market downturn was the primary factor in the 22 January 2008 decision by the U.S. Federal reserve to cut interest rates and the economic stimulus package signed by President Bush on 13 February 2008.
· FOR five months, it has been clear that rising delinquencies and foreclosures, coupled with higher interest rates and declining home price appreciation, would undermine the market for mortgage securities. Yet it took the Administration until Jan 2008 to react to this looming financial crisis.
· The subprime crisis has not been averted. In fact, it is worsening and threatens to tip the economy into a recession.
· On the contrary, many Fed officials counted on the housing boom to prop up the economy after the stock market collapsed in 2000.
· Eventually the U.S. economy will weather the storm.
· Loan incentives and a long-term trend of rising housing prices encouraged borrowers to assume mortgages, believing they would be able to refinance at more favorable terms later.
· Major banks and other financial institutions around the world have reported losses of approximately U.S. $140 billion as of February 2008.
· The subprime crisis also placed downward pressure on economic growth on economies around the world.
· The downturn in the housing market has resulted in a significant decline in new home construction and housing prices.
· The risks to the broader economy created by the housing market downturn was the primary factor in the 22 January 2008 decision by the U.S. Federal reserve to cut interest rates and the economic stimulus package signed by President Bush on 13 February 2008.
· FOR five months, it has been clear that rising delinquencies and foreclosures, coupled with higher interest rates and declining home price appreciation, would undermine the market for mortgage securities. Yet it took the Administration until Jan 2008 to react to this looming financial crisis.
· The subprime crisis has not been averted. In fact, it is worsening and threatens to tip the economy into a recession.
· On the contrary, many Fed officials counted on the housing boom to prop up the economy after the stock market collapsed in 2000.
· Eventually the U.S. economy will weather the storm.
Fiction
· The efforts of the Federal reserve in cutting interest rates and the economic stimulus package signed by President Bush on 13 February 2008 have brought relief to homeowners.
· The interest rate cut by Federal reserve is being passed down to the consumers.
· The banks and lenders have changed tac and are adopting a more humane approach towards harassed borrowers. Some collectors have resorted to threatening to have the person arrested, making improper bank withdrawals, intimidating people and making harassing phone calls.
· Most people are aware of their rights when it comes to dealing with intimidating lenders.
· The efforts of the Federal reserve in cutting interest rates and the economic stimulus package signed by President Bush on 13 February 2008 have brought relief to homeowners.
· The interest rate cut by Federal reserve is being passed down to the consumers.
· The banks and lenders have changed tac and are adopting a more humane approach towards harassed borrowers. Some collectors have resorted to threatening to have the person arrested, making improper bank withdrawals, intimidating people and making harassing phone calls.
· Most people are aware of their rights when it comes to dealing with intimidating lenders.
Homeowners / Borrowers’ Rights
· A debt collector cannot call you before 8 a.m. or after 9 p.m., unless you agree.
· You cannot be contacted at work if the collector knows your employer disapproves.
· If you don't want to hear from a debt collector, write a letter telling them to stop. By law, they have to. Remember, the debt won't go away and you can still be sued.
· The debt collector can contact your attorney -- if you have one. If not, your friends and family can be asked about how to get in touch with you.
· A debt collector can't misrepresent the amount of your debt.
· A debt collector also cannot use profane or threatening language
· Debt collectors can't say that they will put a lien on your property or file a lawsuit unless the agency really means to do that and it's legal.
· Collectors can't legally claim federal benefits, such as Social Security or your retirement accounts, like your IRA or 401(k).
· You cannot be contacted at work if the collector knows your employer disapproves.
· If you don't want to hear from a debt collector, write a letter telling them to stop. By law, they have to. Remember, the debt won't go away and you can still be sued.
· The debt collector can contact your attorney -- if you have one. If not, your friends and family can be asked about how to get in touch with you.
· A debt collector can't misrepresent the amount of your debt.
· A debt collector also cannot use profane or threatening language
· Debt collectors can't say that they will put a lien on your property or file a lawsuit unless the agency really means to do that and it's legal.
· Collectors can't legally claim federal benefits, such as Social Security or your retirement accounts, like your IRA or 401(k).
Conclusion
Subprime lending is highly controversial. Opponents have alleged that subprime lenders have engaged in predatory lending practices such as deliberately lending to borrowers who could never meet the terms of their loans, thus leading to default, seizure of collateral, and foreclosure. There have also been charges of mortgage discrimination on the basis of race. Proponents of subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market.
The borrowers facing a crisis and facing foreclosure or needing to sell their properties are advised to know their rights, have patience and hold on for the situation to improve; and improve it shall. In the meantime, renting out property is the option that needs to be explored for current housing problem to blow over. The Federal authorities too can explain to consumers why it takes so long for their efforts, like the interest rate cuts, to trickle down to those for whom their efforsts mean the difference between relief and agony.
Subprime lending is highly controversial. Opponents have alleged that subprime lenders have engaged in predatory lending practices such as deliberately lending to borrowers who could never meet the terms of their loans, thus leading to default, seizure of collateral, and foreclosure. There have also been charges of mortgage discrimination on the basis of race. Proponents of subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market.
The borrowers facing a crisis and facing foreclosure or needing to sell their properties are advised to know their rights, have patience and hold on for the situation to improve; and improve it shall. In the meantime, renting out property is the option that needs to be explored for current housing problem to blow over. The Federal authorities too can explain to consumers why it takes so long for their efforts, like the interest rate cuts, to trickle down to those for whom their efforsts mean the difference between relief and agony.
1 comment:
This is a very good post. I got a very decent overview of the issue by reading it. It was especially heartening to read that homeowner's have rights.
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