Please list 5 reasons for the foreclosure crisis raging through america?

Answer 1

What's up? Not income and earnings.
In an alarming reversal of past progress, real household income for the typical family has declined over the last seven years. Despite increases over the prior two years, median household income for 2006 is still more than $1,000 below its peak in 1999. This week's Economic Snapshot looks at how typical families are finding it increasingly difficult to maintain real income levels.

Answer 2

There is not "foreclosure crisis raging through America". The vast majority of mortgages are in fine shape and are not in arrears. Those problem mortgages have several causes. High up on the list are the speculators. These are people who caught the "Flip this House" fever and purchased properties they intended to flip quickly for a profit. While the market was hot they purchased property with really low but temporary mortgage rates. When the market cooled they were caught unable to sell the property and unable to afford the skyrocketing mortgage rates.

There are also people who failed to do there homework. They bought houses with ARM's that they thought they could refinance. However, when they tried to get a fixed rate loan they discovered that they did not qualify because they requirements are much higher.

Then there are the rest who simply bought too much house, with too little income.

This is not a foreclosure crisis. It is a market correction.

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Answer 3

1 - 5: Sub prime lenders and their shady deals.

People are given "teaser" rates with low payments. Then in a couple years those payments go up by several hundred dollars a month. Now those mortgage payments are no longer affordable and people are losing their homes. ARM's are great if you can refinance at will. But as people are finding out those ARM's are burying them and they are having a very difficult time getting refinanced at their banks. Why? Because their homes aren't worth as much as the loans they have out. So guess what, either you get another job just to keep a roof over your head or you let your house go into foreclosure. Either way it is not pretty. The lenders are culpable by getting people into loans that they could not possibly afford. The people taking the loans are culpable by signing papers on a mortgage that they have no business signing. It's sad really. But if you're a buyer it won't be too much longer before you can get a home for dirt cheap because the owners just want out of them and are willing to take a beating on the sale.

Answer 4

As financial crises go, this one is still pretty tame - the S&L crisis certainly felt more serious, at the time, for instance. I expect this one to resolve in a similar way: a massive bail-out courtesy of the taxpayer.

The reasons are to some extent the same as with any bubble. A market became irrationally overvalued. It seemed like it was going up fast and would go up forever. People started to make less and less prudent investments in the market, they borrowed money to make those investments, and the lenders underestimated the risk of making those loans. It's basically the same psychology that led to the Stock Market crash in '29, and to the dot-com bubble in the 90s.

Answer 5

The major reason is people taking advantage of low interest ARMs and kept refinancing and pulling money out of the property. Now the market is correcting and the house is not worth what they owe and the interest rate is now adjusting and they crunch is on. People also didn't expect that taxes and Insurance would be so quick to follow. If you didn't have a homestead on your property, the taxes are killer, and in Florida, the home insurance rates are bordering on criminal. I've know retirees come down and pay cash for their houses but have to work to pay for the taxes and insurance which could be quite hefty.

Answer 6

People hoping to jump on the bandwagon and make quick but purely speculative money.

People not saving for things and buying solely on credit.

Predatory lending practices.

Weak oversight of said predatory lending practices.

Developers putting up homes faster than you can say, "sprawl".

Basically it all amounts to greed, just who it's coming from changes.

Answer 7

#1 Many people are greedy
#2 Many people are stupid
#3 The market turned down before their ARM's went up
#4 see above
#5 see above

Answer 8

1) foreign investors
2) no verification to get a loan
3) lack of thought by those obtaining the loan
4) greed
5) investors panic without reason.

Answer 9

1 reason only. People who live beyond their means.

Answer 10

one will tell everything. people making 16k a year and buying 200k homes