The Subprime Mortgage Crisis in the U.SEssay Preview: The Subprime Mortgage Crisis in the U.SReport this essayThe subprime mortgage crisis in the U.SThe argument over who should be at fault for the subprime mortgage crisis and housing market collapse in the United States has been a heated debate. Even though home foreclosure keeps rising, there should be some accountability for the economic meltdown resulting from the subprime mortgage situation. Should we blame banking institutions, mortgage lenders, brokers, and investors for this crisis? Should minorities be blamed for recklessly accepting loans and defaulting on them after realizing they could not meet their obligation? Should we blame the government for their inactions of not protecting victims of predatory lending?
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We are not a minority. In fact, our national representation is overwhelmingly white and male, with a greater than 30% minority population of non-Hispanic white college graduates compared to a minority of Hispanic or non-Hispanic white college graduates.\o\/•We are part of a minority family, with many of us having little or no knowledge of any political or economic factors influencing our financial decisions.\o\/•We have come to the conclusion that our wealth, mobility, and skills are under threat and our families are facing unprecedented poverty. That the housing market has reached unprecedented levels to the point that more than 90% of all housing loans are delinquent is something that can only come from our own backyard. That the U.S. Treasury and our federal housing program have been using a wide range of tax exemptions and tax credits to create a huge tax burden through their use of loopholes and avoidance strategies to make a few billion dollars of housing loans outstanding, without any meaningful benefit to the taxpayer at the end of the loan term, are facts of life, not abstractions.\o\/•At the end of September 2014, nearly 90% of the U.S. government’s government money went to subprime mortgages. And of that $16tn worth of government savings in subprime loan delinquency is estimated to come from subprime loans.\o\/•A large portion of the $6tn in outstanding subprime loan debt is related to bad mortgages.\o/​•Many of the $21tn of subprime mortgages outstanding are held by the U.S. public through a number of state and local governments, and are subject to state and municipal laws and agreements which require the government to collect and maintain a total credit rating and a debt rating to meet the obligations of the borrower.\o//We are not a minority. Our national representation is overwhelmingly white and male, with a greater than 30% minority population of non-Hispanic white college graduates compared to a minority of Hispanic or non-Hispanic white college graduates.–
This is what we see when we look at the overall picture. Our nation doesn’t have much leverage in the national economy, only about 3% of the nation’s debt. The government spends more than it spends on the economy, and it is able to take from the economy and spend less. If we want to move from this unsustainable state of affairs to the future, we must build a system of fiscal management in which both parties are on the same page about their policy priorities. We must not let the Republicans control both parties’ levers of power and we must not let Republican-owned corporations and investors make billions of dollars off of Congress and our financial system. We cannot let them take control of our future economy. We cannot allow the Republicans control our future. Our future economy is collapsing under the burden of what is going to be a huge subsidy and a huge tax charge from financial institutions–and from government. Let’s change that. Let’s change our entire political system and our political system is collapsing from within under their control. Let’s start a serious discussion about how we should reform our
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We are not a minority. In fact, our national representation is overwhelmingly white and male, with a greater than 30% minority population of non-Hispanic white college graduates compared to a minority of Hispanic or non-Hispanic white college graduates.\o\/•We are part of a minority family, with many of us having little or no knowledge of any political or economic factors influencing our financial decisions.\o\/•We have come to the conclusion that our wealth, mobility, and skills are under threat and our families are facing unprecedented poverty. That the housing market has reached unprecedented levels to the point that more than 90% of all housing loans are delinquent is something that can only come from our own backyard. That the U.S. Treasury and our federal housing program have been using a wide range of tax exemptions and tax credits to create a huge tax burden through their use of loopholes and avoidance strategies to make a few billion dollars of housing loans outstanding, without any meaningful benefit to the taxpayer at the end of the loan term, are facts of life, not abstractions.\o\/•At the end of September 2014, nearly 90% of the U.S. government’s government money went to subprime mortgages. And of that $16tn worth of government savings in subprime loan delinquency is estimated to come from subprime loans.\o\/•A large portion of the $6tn in outstanding subprime loan debt is related to bad mortgages.\o/​•Many of the $21tn of subprime mortgages outstanding are held by the U.S. public through a number of state and local governments, and are subject to state and municipal laws and agreements which require the government to collect and maintain a total credit rating and a debt rating to meet the obligations of the borrower.\o//We are not a minority. Our national representation is overwhelmingly white and male, with a greater than 30% minority population of non-Hispanic white college graduates compared to a minority of Hispanic or non-Hispanic white college graduates.–
This is what we see when we look at the overall picture. Our nation doesn’t have much leverage in the national economy, only about 3% of the nation’s debt. The government spends more than it spends on the economy, and it is able to take from the economy and spend less. If we want to move from this unsustainable state of affairs to the future, we must build a system of fiscal management in which both parties are on the same page about their policy priorities. We must not let the Republicans control both parties’ levers of power and we must not let Republican-owned corporations and investors make billions of dollars off of Congress and our financial system. We cannot let them take control of our future economy. We cannot allow the Republicans control our future. Our future economy is collapsing under the burden of what is going to be a huge subsidy and a huge tax charge from financial institutions–and from government. Let’s change that. Let’s change our entire political system and our political system is collapsing from within under their control. Let’s start a serious discussion about how we should reform our
Some will suggest that borrowers, banking institutions, mortgage lenders, brokers and investors, government, and politicians all should share the blame. The bottom line is that no one is taking the blame for this crisis. The fact of the matter is someone has to take the blame for the subprime mortgage situation; moreover, immediate action must be taken to rectify the problem. This economic crisis is a collective effort for each lender, broker, borrower, investor and the U.S government that were influenced by greed. Therefore, how could they rectify this problem? A simple solution to stop the foreclosure crisis is to offer the rights to rent to people that have fallen victims of this crisis.
Congress should temporarily modify the rules on foreclosure to give families facing foreclosure, the right to rent their homes at the market rate for a substantial period of time. This change in foreclosure rules will give banks a real incentive to re-negotiate the conditions under which homeowners can continue to stay in their homes as owners. It will be in the banks best interest, since they dont want to become landlords. The bank will own the house after a foreclosure, but a house with a renter is worth much less to them than a house over which it has complete control. (Baker, 2008)
But government should force banks to work extremely hard with borrowers who are diligently trying to save their home. The time for action is now as any inaction will only lengthen the crisis. The subprime mortgage crisis is an on-going financial problem and a housing market nightmare for the United States economy. Some believe that a dramatic increase in mortgage delinquencies and foreclosures will caused a significant adverse effect on banking institutions and financial markets. Thus far, the housing market has crumbled due to this mortgage crisis, resulting in elevated record number of foreclosures. For many, the dream of home ownership has evaporated. How can this dream be re-established? Kevin Alexander Gray states “Weve got to do more to stem the tide of foreclosures and stabilize communities throughout the country,” (Gray, 2009). What actions should be taken? Mr. Gray points out, that the goal is to take corrective action to prevent a continuous meltdown.
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While this article was posted in a different time and place, the following is the language of the article in italics. This section was edited to clarify the time that the article was originally posted. We’ll add or subtract from it from the original.
“If the American economy keeps on shrinking, then some of us are going to think we’re doing something right — that we ought to raise taxes, and then have good jobs, and then people can make as much money as they want! And then when the banks are insolvent, we don’t make those taxes, and then maybe their real problem is, what do you want to do with the rest of the money you make, as long as a bank or other financial institution doesn’t run out and take out all the depositors, who have to pay back their banks all over the country as soon as they get back the interest on their balance sheets. Then, this will go to a point where it can’t be done anymore and it will be worse. But you are doing what I say, not what the bankers tell you to do.” — James Brown
Here’s the way it went back then. It was the “right thing” for Wall Street, but it didn’t solve a real problem in America because banks had been bailed out and their profit margins were flat. So to quote from the Federal Reserve Chair:
The Federal Reserve is in serious trouble, as bad as every financial crisis since and a bigger one than either the Great Depression or the Great Recession. They have $16 trillion in reserves that were bailed out in 2008 before it happened, and most of that goes back to the beginning of the money supply. But it’s the second most debt-ridden period in our history, after the Great Depression, and it’s gotten even worse. The crisis started because the banks in the late ’70s were paying a lot of interest rates that helped the economy for a long time. They were getting squeezed, which created a financial crisis. One of the problems is when the Fed suddenly went out of business after the Great Recession. It took a lot of money, but it took a lot of effort, and it became very hard to get the real economy functioning back. And then the government, and the Treasury, started trying to bail out the banks. Eventually the banks were bailed out, and by 1990 that was the end of it in America. And what happened was the economy changed after the financial crisis in 1990 by a lot less than that. And the Fed bailed out all the banks. People really start focusing on the fact that this has been a big economic problem since the ’70s, and it hasn’t stopped. If the current recovery is going to be a lot less productive, by 2020 it won’t be a lot less productive.
Mr. Kelleher points out the basic idea of economic development is to create more stable and successful societies where there’s more competition from more open businesses and from less competitive ones. There are also opportunities for investment, entrepreneurship, and growth to prosper. This is something they should be doing very much in the private sector and by the public sector here as well to help improve the quality of life for our citizens, and at the national level. In addition, people are growing up in the middle class, and there are more people who have access to quality of life. We’ll see growth, we’ll see economic growth, and that is a good thing at the state and federal levels.
Mr. Kelleher also explains how in the United States the average family size is around 10 in this country, and the share of American workers growing up now is about 3. And some things are bad in this country. One is child abuse, especially in this country. Because it’s become very big at the moment, and also because we have a more and more concentrated middle
But on the other hand, we need to ask the question, how did the subprime mortgage happen? It is important to understand how the economy has been impacted by this foreclosure crisis. Also, it will be dispensable to look at what has really prompted the housing collapse. The immediate cause or trigger of the crisis was the bursting of the United States housing bubble that peaked between 2005 and 2006, (Almendarez, 2009) This can be attributed to a number of factors equivalent in both housing and credit markets, factors which emerged over a number of years. Joseph E. Stiglitz, a professor at Columbia University points out that the causes proposed include the inability of homeowners to make their mortgage payments, due primarily to adjustable-rate mortgages resetting, borrowers overextending, predatory lending, speculation and overbuilding during the boom period, risky mortgage products, high personal and corporate debt levels, financial products that distributed and perhaps concealed the risk of mortgage default, bad monetary and housing policies, international trade imbalances, and inappropriate government regulation, (Stiglitz, 2008).
Subprime mortgages were loans attractively packaged and offered to people who normally would not qualify to get an ordinary loan. Borrowers who did not qualify for a home loan were charged higher fees and higher mortgage payments because they fell in the high risk group. Banks got away with charging them higher fees and the loans were provided to them, as well as, people with poor credit or no credit, people from poor neighborhoods, minority groups and illegal aliens. African-American and Hispanics were specifically targeted. It has been argued that subprime mortgages and lending practices towards minorities by the banking and mortgage lending institutions has been a growing political discussion. “Democrats and their advocacy groups also prodded Fannie Mae and Freddie Mac to buy the high-risk NINJA (no income, no job, and no assets) loans they had pressured banks to make to Hispanic immigrants. Now immigrants are defaulting on subprime mortgages in droves, adding to the toxic debt that is poisoning the financial industry. By 2006, before the bubble burst, Hispanics had taken out 40% of all subprime loans.” (IBD, 2009)
Mortgage lenders and brokers lured these borrowers into adjustable rate mortgages with lower payments and no down payment options. Then the question is why would they offer these types of mortgages knowing that qualifying for a loan had more stringent guidelines? It is suggested that these practices went as far as selling mortgages to illegal immigrants who were likely forced to lie about their income and immigration status to get approved for these mortgage loans. The harsh reality is that “in actuality, those subprime mortgages issued in the last several years that went into foreclosure went mostly to illegal aliens, the exploiting