18 Oct Mortgage Crisis: How Did We Get Here?
The mortgage crisis that we are facing now is the collapse of a house of cards that the mortgage industry started building in the late 1980’s and 1990’s, when lenders relaxed the rules for borrowers and made it easier for more people to buy homes or qualify for bigger mortgages. As demand for homes increased with the addition of these new borrowers, builders began producing more homes.
Prices rose as people began buying/selling homes as first time buyers got into the market and people began moving to larger homes, all the while financing their way up. Some people who never should have gotten mortgages were given mortgages. There were people who could afford a home, but were talked into a bigger one than they needed. Some borrowers were put into subprime loans, even though they qualified for standard loans.
Gone were the days when people bought a home with the intent to eventually pay the mortgage off. Living in a paid off house was a forgotten dream.
Gone were the close sibling relationships forged by negotiations over when to turn off the lights or the radio, or who got the top bunk. Children were no longer expected to share rooms or even bathrooms when a new home could provide a room for every family member.
Gone were down payments that had to be carefully saved to earn the right to buy a house. Brokers encouraged people to buy the most expensive house possible, with 100% financing with an 80/20 or 80/10/10 loan, or an A.R.M. with promises of refinancing in a year or two.
Add to that, credit card companies eased up on lending rules for credit cards driving families deep into unsecured debt, with many families using credit cards to try to make ends meet. Many borrowers eventually have to chose between making the card payments or covering their living expenses.
Looking at the crisis now there is plenty of blame to go around. Lenders and brokers pushing loans and credit cards, borrowers who believed that they could afford the American Dream with monthly payments, CEOs of lenders that took their large severance packages while their workers were laid off and unable to afford their mortgage payments.
There are lots of reasons for this mess, and and many theories about who is to blame and what might have been done to avoid it. But it is what it is, and we have to deal with it. Values of homes will reset. People will make sacrifices and more families will lose homes. Hopefully lessons will be learned so that history will never repeat this credit crisis again.
However if you are facing a mortgage crisis yourself, see an experienced bankruptcy attorney in your area. Bankruptcy can help eliminate payments on debts like medical bills, credit cards and some loans in order to free up money to pay your mortgage. Chapter 13 bankruptcy can stop foreclosures and eliminates debts, and give you time to catch up the missed mortgage payments.
by Susanne Robicsek, Charlotte NC bankrupty lawyer
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