The Foreclosure Epidemic: No End in Sight
By: Gerri L Elder
The nationwide foreclosure epidemic is the product of the housing boom and lax sub-prime mortgage lending practices.
When the bubble burst and the housing market fell with a thud, the resulting shockwaves sent the economy into a spiral.
The result has been an economic recession, which has been devastating to people of all walks of life.
The Roots of the Foreclosure Crisis
Tracing the roots of the recession is easy enough.
A look at the sub-prime lending frenzy prior to the collapse of the housing market reveals nearly obscene levels of deception by mortgage brokers and a bumper crop of stated income, or "lie loans" that were doomed to fail.
Although some find it difficult to place the blame squarely on the sub-prime lending industry, it’s clear that many lending practices were reckless at best, and in some cases, verging on criminal at worst.
Homeowners were clearly set up to fail by these practices, the only question was when.
The bubble was bound to burst sometime and everyone hoped it would be later, rather than sooner.
Is the Housing Problem Over?
An article by Bradley Johnson, posted on WorthyPosts.com poses the question: Is the mortgage crisis over?
The answer is not clear cut, but many economists believe it may be winding down.
Certainly the credit market has tightened, and with the spotlight on sub-prime lending practices much of the shadiness has been eliminated.
Many unscrupulous sub-prime mortgage brokers are now unemployed. However, recovery from the mess will take a while.
Johnson also brings up an interesting point about what the future may bring. Although the initial foreclosure tidal wave was comprised primarily of sub-prime mortgage loans, the problem has now infected the prime market.
The State of the Economy
As the nation reeled from the sub-prime mortgage crisis, the economy was steadily sinking into a recession.
The bulk of sub-prime mortgage loans that were doomed to fail already have. However, the foreclosure rate is not slowing down, as the recession hits debtors hard and prime mortgage loans have begun to go into default in record numbers.
Housing prices are not rebounding and are not likely to do so any time soon.
The inflated values of real estate were another component of the problem that led to the collapse of the housing market and subsequent flood of foreclosures. Many homeowners are upside down in their mortgage loans and are unable to refinance or sell because they owe so much more than their homes are now worth.
This is a problem across the board and those with once stellar credit are feeling the sting, just as so many in sub-prime loans have.
As the country attempts to dig its way out of the recession, progress is slow.
The nationwide unemployment rate is the highest it's been in decades and there is no quick fix.
While sub-prime chaos had ground to a halt, foreclosure frenzy in the prime market may be winding up to deliver another crushing blow to homeowners and the economy, with many homeowners filing for bankruptcy just to halt foreclosure.