Social Problems Blog 1

2011-10-06T06:27:00.000-07:00

Boaz McMahon

The Housing Market and Foreclosures.

http://money.cnn.com/2011/10/05/real_estate/foreclosure_backlog/index.htm?iid=HP_LN

Foreclosure backlog deepens.

As foreclosures increase the amount of time a borrower can stay in their home with a defaulted mortgage increases. Currently a homeowner can stay in there home for one year and nine months without making a mortgage payment. The process slows even more in judicial states where the foreclosure must be processed in the courts opposed to non-judical states where a trustee can handle the foreclosure. Foreclosure and unemployment usually move in lock step with each other, which is happening currently.

This is a social problem in several different but equally important ways. The big banks and governmental agencies responsible for lending or securing the mortgages took advantage of unexpecting and improperly educated borrowers. Some try to place all the blame on the borrowers. To put this in perspective I am going to quote the writer Adam Carvalho, “What big banks did to borrower’s can be compared to asking a girl if she wants to have sex, but yet she does not understand what sex is.” He claims that if you think his example is unethical then so was predatory lending. What they did was set people up for imminent default. The main underlying factor of predatory lending (which contributed to this foreclosures) was greed. Banks became so greedy they were making up to an 11% return on investment annually, when in the past they were satisfied with 4%. Banks took the predatory lending one step further when they offered negative amortization loans to borrowers, they were letting the borrowers pay interest only (sometimes less) and still expecting the principle to be paid on time. The borrowers were also greedy, making purchases beyond their means and using the negam loans to finance it.

The majority of America agrees that the “bad notes” and predatory lending was the reason that led to the foreclosures. What people do not agree on is whose fault it is. Without a statistic to support me I would assume that the greater population blames the foreclosures on someone beside themselves. You cannot blame one party for the serious problems that came out of the defaulted notes, to go back to Adam’s quote the girl should not agreed to sex without knowing the meaning. The banks took advantage of the borrower’s and the borrower’s trusted the banks. I suppose the only underlying assumptions is that the persons point of view is greatly influenced by how they stand now and how they were affected by the housing market. It would be interested to find a non-affected parties input.

Social Problem 1

Social Problems Blog 1