HOUSING &CREDIT

ARTICLE 1

Well it says here that due to the economy it caused

the housing market to plummet, in 2006/2007. the

minor issue is that the builders who built these million

dollar houses basically don't do too well of a job,

causing people to spend more money in repairs than

they asked for when the originally bought the house. In

the end many factors such as unemployment, home

foreclosure, loans, tax credit from the government, and

debt caused a huge problem for the public and the

housing market, which poorly reflected the economy

and its state during this time period (2006-2010).

ARTICLE 2

Here’s the problem, though. Any decent storming of a

citadel requires pitchforks and torches. That’s the

standard metaphor for the enraged. Due to plummet in the

economy and market even president Obama is enraged

with this conflict. with so many factors listed before and

now: banks, the national debt and many other we need to

fix this problem where it begun, only this would in the end

cause us to figure out a way to get out of debt,

WHAT IS HOUSING & CREDIT

Credit is an exhibition of trust from a seller that a

purchaser can and will pay for goods later than they

were bought.

The housing market is where houses are bought

and sold. And tight credit makes it hard for people to

buy houses.

PROBLEM

The decline in house prices accelerates offers to sell and slows home buying,

causing a rise in the inventory of unsold homes and a decision by home builders

to slow the rate

of construction. Home building has now collapsed, down 20 percent from a year

ago, to the

lowest level in a decade. AT this time credit became cheap and easy to obtain.

A 20 percent national decline would mean smaller declines in some

places and larger

declines in others. Since mortgages are effectively non-recourse loans,

borrowers can walk away with no burden on future incomes. While experience

shows that most homeowners continue to service their mortgages

even when the loan balances slightly exceed the value of their homes, it is not

clear how they

would behave if the difference is substantially greater. The decision to default

would be more

likely if house prices are expected to fall further. in the furture this could cause

major poverty for the public.

SOLUTION

There needs to be a standard to be set in building these

houses! a piece of legislation or something needs to get passed

to make sure if these houses are up for these crazy prices they

need to be set to a standard and check by someone from the

state that's familiar with this field. Also we need a way for

people to start seeing financial advisors or something because

they cant be buying these million dollar houses and then find

themselves in crazy debt and the worst possible situation

financially

SOLUTION CONT.

1. Saving America’s Family Equity Plan:

The goal of SAFE is to transfer large existing loans from the

current holder of the mortgages to new owners who will refinance

them on affordable terms. The sale price paid would reflect the

current value of those mortgages, significantly less than the face

value. This will ensure there is no bailout of the financial institutions

and existing investors, many of whom uncritically and irresponsibly

created the bubble by lending in the hope that continued house

price appreciation would make up for the absence of meaningful

credit evaluation. The transfer will help to unfreeze financial

markets. The SAFE program also includes complementary policies,

such as:

SOLUTIONS CONT.Housing Counseling Resources. Counselors are essential in helping homeowners into

restructuring programs, but the system must grow to meet the current and future

needs.

New Federally Backed and Responsible Loan Products:

Given market uncertainty, investors will only fund new SAFE loans if the government

insures against catastrophic losses. Credit enhancements for new SAFE loans to

owner-occupants would include more flexible Federal Housing Administration-insured

loans as well as special programs for Fannie Mae and Freddie Mac.

A Mechanism to Prevent Borrowers from Getting a Windfall:

Any loan that is written down to below current fair market value of the home could be

accompanied by a second mortgage that permits the lender to recover an amount up

to the difference between loan amount and current value, if the home is subsequently

sold for more than the new loan amount.

SOLUTION CONT.

The Great American Dream Neighborhood Stabilization Program:

The GARDNS Fund would provide state and local governments with up

to $20 billion in new Community Development Block Grants or HOME

funds for programs to return foreclosed properties to productive use.

Funds would be targeted at communities most heavily impacted by

foreclosures. Putting families into homes with payments they can

sustain will not only provide a new source of affordable housing and

prevent crime and blight; the GARDNS program will reduce housing

inventories and keep surrounding house prices from falling further.

SOLUTION CONT.

Judicial Loan Modifications:

The House Judiciary Committee’s reported bill would conform

the treatment of currently outstanding non-traditional and sub-

prime mortgages on a primary residence to the treatment of

other secured debt, including cars, second homes, and

investment properties. In addition to assisting borrowers in

bankruptcy, the bill provides an incentive to servicers to speed

up the process of voluntarily restructuring mortgages, where

possible.

SUMMARY

The housing sector is now (September 2007) at the root of three

distinct but related problems:

(1)a sharp decline in house prices and the related fall in home

building;

(2) a subprime mortgage problem that has triggered a substantial

widening of all credit spreads and the freezing of much of the credit

markets;

(3) a decline in home equity loans and mortgage refinancing that

could cause greater

declines in consumer spending. Each of these could by itself be

powerful enough to cause an economicdownturn. The combination

could cause a very serious recession unless there are other

offsetting forces.- this is what we are dealing with

ADDITIONAL INFORMATION

Credit:

why the US national debt is rising fast. There are three major reasons for this: first, major

tax cuts especially on corporations and the rich since the 1970s, and especially since 2000,

have reduced revenues flowing into Washington; second, costly global wars especially

since 2000 have increased government spending dramatically; and third, costly bailouts of

dysfunctional banks, insurance companies, large corporations and the economic system

generally since 2007 have likewise sharply expanded government spending.

it means rising debt caused downgrade in credit

mainly influenced by the global financial crisis

ADDITIONAL INFORMATION

Housing:

Natural disasters into insurance problems too

Tornado, flood, and hurricanes from last year made a huge impact on housing.

Since the 2011 Hurricane Katrina, a National Flood insurance program was

created where the program’s premiums don’t fully cover insurance claims. The

NFIP struggled under massive debt when Katrina hit and when Irene hit the

program became more in debt. Now in flood prone places “you can’t get a

mortgage if you don’t have flood insurance” said home owners living in flood

prone areas.

Robo signing scandal

Banks accused of approving foreclosures without complete and proper

documentation. “One that could include reducing loan balances of current

home owners, if approved.” Leaving many homes in foreclosure process and

one settled there may be foreclosure in future 2012.

CONT.HARP

Federal Housing Finance Agency (FHFA) expanded the Home Affordable Refinance

Program but the borrowers have to be current on their payments. Meaning that

families who fall behind their payments and hope to get loans can’t be helped

anymore. No payment means no homes for these families.

Debt Ceiling/Budget Deficit

Debt ceiling aka statutory debt limit used by the US treasury to keep nation indebted.

August 2011 government had a debt ceiling debate on whether to raise it but problem

is reduce deficit.

Loans

Government lowered the conforming loan limit for loans by Frannie Mae(FNMA

federal national mortgage) and Freddie Mac (FHLMC federal home loan mortgage)

and Federal housing Administration from $729,750 to $625,500. Both FNMA and

FHLMC urge government raise loan limits but only back up FHA loans. “Mortgage

lenders are willing to charge lower rates for loans that used to qualify for federal

backing no longer do”

BIBLIOGRAPHY

http://www.nber.org/papers/w13471.pdf

http://www.americanprogress.org/issues/2008/03/h

ousing_basics.html

http://moneyland.time.com/2011/12/29/5-events-t

hat-really-mattered-for-housing-in-2011-and-beyo

nd/?xid=rss-topstories&utm_source=feedburner&

utm_medium=feed&utm_campaign=Feed%3A+ti

me%2Ftopstories+%28TIME%3A+Top+Stories%

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http://www.guardian.co.uk/commentisfree/cifamer

ica/2011/aug/07/standard-and-poor-downgrade

http://www.globalissues.org/article/768/global-fina

ncial-crisis