In the year 2000, the stock market crashed whichshifted thepeople’s money away from the stock market and into the housing market. Many people were buying homes, which led to banks offering more loans, including subprimed loans. Most loans, specifically, subprimed loans began going into default once the credit markets froze in the summer 2007. Things began to deteriorate rapidly. The offering of subprimed loans stopped completely and interest rates for other types of borrowing such as corporate loans and consumer loans rose dramatically. Since the interest rates of loans were so high, home owners were not able to afford to make payments, which caused them to be evicted from their homes. In 2013, the government introduced new laws and …show more content…
In the new system, Fannie Mae has also allowed buyers to mortgage homes for 3 percent down, if the buyer has good credit and does not have enough money to close the deal.
The Federal Housing Authority has put a similar plan together called the “Back to Work Program” which can help the buyer return to the housing market in as little as one year if the buyer is able to meet certain guidelines. The guidelines included in the “Back to Work Program” are: the buyer must pay their bills on time, had a 20 percent reduction in income, and a minimum credit score of 620. The “Back to Work Program”, has strict guidelines to make sure that the buyer is responsible, they must pay their bills on time and cannot miss one payment, or else they will be ineligible for the program. The 20 percent reduction in income must be demonstrated to be in the result of loss of employment and the reduction in income must be for a duration of 6 months. The Federal Housing Authority primarily requires the boomerang buyerthat is purchasing a home to have an hour long credit counseling session with the Department of Housing and Urban Development, after the session is completed a plan is created for the buyer.
Another option for
However, hope might be on the horizon for the victims of the mortgage disaster of 2007/2008. Home buyers who were foreclosed upon years ago, or boomerang buyers, are beginning to be eligible to buy homes again. While some feel hope after feeling bamboozled by lenders and Fannie Mae and Freddie Mac, some feel anxious and fearful of the thought of buying again. Yet there are lessons that have been learned by the mortgage meltdown. Fannie Mae and Freddie Mac provided a lesson for the
This is a popular choice for first time homebuyers. The FHA loans enable you to acquire a home with a smaller downpayment. The program is designed to allow almost anybody to purchase his own home as it makes it easier for homebuyers to qualify
During the early 2000 's, the United States housing market experienced growth at an unprecedented rate, leading to historical highs in home ownership. This surge in home buying was the result of multiple illusory financial circumstances which reduced the apparent risk of both lending and receiving loans. However, in 2007, when the upward trend in home values could no longer continue and began to reverse itself, homeowners found themselves owing more than the value of their properties, a trend which lent itself to increased defaults and foreclosures, further reducing the value of homes in a vicious, self-perpetuating cycle. The 2008 crash of the near-$7-billion housing industry dragged down the entire U.S. economy, and by extension, the global economy, with it, therefore having a large part in triggering the global recession of 2008-2012.
The Great Recession of 2007-2009 was one of the most economically disastrous events in American history. The housing market took a significant downturn during this period. People were not cautious when it came to their money and loans. Larger loans were given out to people, even to those with bad credit and low incomes. These large loans caused many homes to go through foreclosure since people were unable to pay off their mortgage debts. These debts were created by banks increasing the interest rates on the loans significantly in a short period. In 2008, foreclosures were up by eighty-two percent. This increase is significant because the previous percentage of foreclosures was at fifty-one percent from 2007. Unemployment skyrocketed, and people
Not only did blockbusters manipulate neighborhoods, they also affected the credit markets in Kansas City, making it difficult for blacks to find fair mortgage rates. Large down payments and notes were given to blacks who were never able to keep up with payments. These families’ homes were quickly foreclosed on, and then real estate brokers would quickly sell the home to another black family who was also unable to keep up with payments. This cycle would continue, and the broker would sell the house over and over again (Colby 76). I wonder what happened to these families that found themselves in over their heads and then were left homeless. Where did they turn? What were their options?
Since this paper only touches upon the basics of this plan, it will only explain three priority groups (keeping in mind that various subgroups can be created for a broader variety of situations). The highest priority group (Group A) must meet the requirements that follow. Homes must have been bought before January 1st, 2009, and the loans must have been financed by Fannie Mae or Freddie Mac. Borrowers must be current on their payments, and must not have missed a payment for one year before requesting the refinance. The group with the second highest priority (Group B) could have purchased their home either before or after January 1st, 2009. However, if the loan was taken out after the date, residents must wait one year (with no missed payments) to apply. Those who qualify for Group B must not have any delinquencies yet, but they can have missed two payments at the most. Therefore, while they do not have to be current on their payments, if they exceed missing two payments, resulting in a delinquency, they must be eligible for Group C. This lower priority group must have a delinquency, before or after the bank starts the process of foreclosure. This group would need to be behind on their payments, missing at least three. While all of these groups are eligible for a refinance, Group A will be able to refinance for the greatest volume of customers at the highest loan
During the period of unemployment or lack of income, the holder can also apply for a $5,000 grant to start a new business (monies granted must accompany a business plan and are subject to approval). After the one-year period, the title of the property would be assigned to B-b-B. B-b-B would assume the financial responsibilities for the property for two years. However, the original homeowners would be allowed to live in their home, although the title ownership was reassigned. If the homeowners were unable to seek employment or stable income after two years, then the house would be sold to B-b-B. Upon title transfer, the homeowners still have an option to rent to own their property or live in homes provided by B-b-B based on family size. Requirement to live in a B-b-B home would be to attend Job training workshops (i.e. Engineering, Secretarial, Construction, Nursing) or matriculate at an Accredited University. In addition, if the individual has a disabling condition, substance abuse disorder, mental health or physical disability, then their income would be provided by the government and he/she would not have to attend any Job training workshops. It is also important to note that to guarantee that the individual is completing his/her goals in a timely manner, a case manager will be assigned to every twenty cases.
The Federal Housing Administration, otherwise known as the FHA, is a government agency created to help alleviate the case of homelessness in the country. The agency is under the authority of the Department of Housing and Urban Development (HUD), set up in 1934 after the Great Depression. The primary purpose of establishing the FHA is to oversee different insurance programs for single family mortgages, insuring mortgage loans provided by HUD-approved lending institutions. In order to get FHA loans, buyers are required to have a satisfactory credit rating and make a down payment.
The Federal Housing Administration (FHA) Program standardizes construction of houses and insures loans for building homes.
Brooklyn, NY – December 30, 2009 Foreclosures continue to rise drastically across the United States due to the recession, and have effected, and continue to affect thousands of families and individuals every day. One aspect we must take into consideration is that most people are not informed of what foreclosure means, or the process, even those who are homeowners. I believe that one step to preventing foreclosure is to educate first-time homebuyers. In addition, first-time homebuyer programs should not only assist potential buyers with financially preparing them to buy a home, but to keep the home once
The housing market crash, which broke out in the United States in 2007, was caused by high risk subprime mortgages. The subprime mortgage crisis resulted in a sudden reduction in money and credit availability from banks and other lending institutions, which was referred to as a “credit crunch.” The “credit crunch” and its effect spread across the United States and further on to other countries across the world. The “credit crunch” caused a collapse in the housing markets, stock markets and major financial institutions across the globe.
The United States economy has been in trouble for the past couple of years. The foreclosure crisis is a condition that began due to the inability of homeowners to pay their mortgages. Foreclosure is a legal proceeding whereby a lender obtains a legal termination of a debtor’s right to redemption. The foreclosure rates have been increasing for a considerable period and certain steps have been put into place to solve the problem. While the government, financial institutions and the general public are highly aware of the crisis, the steps taken to combat the problem are still not sufficient as the foreclosure rates are still increasing.
Due to the recession, many households became financially burdened. As the economy suffered many people faced job loss or at the very least a decrease in income, therefore, leading to many foreclosures. Because of the impact a foreclosure has on one’s credit score, these individuals are not able to qualify for a new loan on another house. Fortunately there are other options in buying a house besides qualifying for a loan such as owner finance and rent-to-own.
Congress is continuously attempting to decide if Fannie Mae should be privatized or owned by the government. One thing the government should focus on is reducing the monopoly characteristics in Fannie Mae. With government intervention, Fannie Mae should be broken up into many smaller companies. This would spread the risk among the financial market and Fannie Mae would have to compete against other companies to stay in business. If unfortunate events lead to another economic crisis, the financial pressure would be placed on more than one company and investors would not have to rely on Fannie Mae to stay afloat (Reiss, David, 951-952). This idea was recently discussed among two senators, Bob Corker and Mark Warner who consider splitting Fannie’s single-family business from their multifamily business. They think the single-family businesses could then be split again into smaller companies (www.money.cnn.com).
Also by 2004, homeownership had peaked at 70%, and as a logical consequence, the majority of people were not interested in buying homes anymore. In the last quarter of 2005, home prices started to decline, which also led to a 40% decrease in the U.S. Home Construction Index during 2006. Not only were new homes being affected, but many subprime borrowers now could not withstand the higher interest rates and they started defaulting on their loans (Chan, 2011).