Why are there so many foreclosure and crisis in the US real estate?

Question

What are the reasons?
Who is guilty, borower, lender, government?
Why people can't pay back their loan?

Answer 1

The end responsibility has to be on each individual. Nobody forces anyone to sign a RE loan and buy a house.

The national sub-prime RE mortgage companies should not have given loans to most of these people in the first place. (I work at a Community bank, and we would never give someone a RE loan with no downpayment and making a payment that barely covers the interest) Its easier to decline a loan application now, than to foreclose on them later!!

People need to do more research and look harder at their personal finances before making a big choice, like buying a house. Low interest rates are good for a few years, but everyone knows they will eventually rise. They should have taken a fixed payment loan, and the payment would not raise, but they may have paid a slightly higher rate for a year or two, but would not be in this situation now.

Answer 2

If you are looking for someone to point a finger at aim your primary pointing finger and see how many are pointed back at you. You have to find out who is to blame for the down turn in the real estate market.

The same loan products that people got years ago were and are still available today. These products were not born 2-3 years ago.

The mortgage industry has sold these same products called sub-prime loans along with adjuatable rate loans for more than 25 years or more.

Sure some people were gready both consumer as well as the mortgage broker, but then those type individuals were around before and will always take advantage of the situation or cheat the system.

The thing that happen this time and didn't happen before was the value of the property did not increase.

This is the sales pitch given this time as was in the past. If you get this adjustable loan now, which you are qualified for, in 2-5 years when your adjustable is about to adjust, we will then refinance your home for the current interest rate. The reason being is that your credit would be straighten out and the value of your property would have increased.

Same sales pitch for those that were sold the sub-prime borrowers, when this 3 year fixed period end and your credit has improved as well as your property will increase in value, we will refinance your property into a current 30 year fixed rate from this sub-prime loan.

The common thread here is that the properties did not go up in value. When they property did not go up in value there was no equity to work with.

Had the properties gone up in value as they had in the past, we would not be discussing sub-prime lending nor the adjustable rate mortgages. These two programs have been around for ages.

So the borrow, mortgage broker, nor the lender could or did not predict that the housing market would flatten out and not increase in value as it as in the past.

Ask yourself this question, why has this problem just surfaced since there products have been here in place and utilized by many borrowers?

Values is the answer the property value was not there and we did not look in our "Crystal Balls" and predict that the values would not increase, but I have said that already.

So who do you want to blame for the down turn in the real estate market? Everyone else is blaming George W. Bush for everything else that happen in the United States, so let's blame that sucker, he is as good as anyone else I know.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 3

The foreclosure rate is high and it is a crisis right now because of one word...GREED. The lenders got greedy and made up these obnoxious loans for people who really couldn't afford to even have a house, then they made their loan terms very easy for almost anyone to qualify and then once they got them in the homes, a few years later, the "real" loan terms started kicking in and the borrowers were not prepared to pay more. The way I see it, it's everyones fault, the borrower, the lender and the government for allowing all this nonsense to take place.

Answer 4

I think it is all because of the god damned money. As the loaners want more, the US government wants more, the buyers want more (either to maintain the value of his bought house or raise its value a little and resell it to make profits), it caused a hell lot of economic problems in the US.
They all are guilty. Governemnt should make adequate studies in the affordability and basic prerequitesite requirements for the buyers. They should have amended the regulations for lenders and borrowers. Likewise, the financial institutions shouldn't aimed at the transaction and issue stock shares to make profits only. They should have made investigations on home buyers carefully and closely before lending out that much money to the underqualified buyers.
They home buyers are mostly can't afford to pay back the loan as they are not actuallly qualify to buy a home and the housing prices are going to decline. The bad economic climate in the US is certainly affect the employment, too.

Answer 5

People who SHOULDN'T have been given loans WERE given loans. They were also Adjustable Rate loans that started out with a low "teaser" interest rate, but the interest rates were adjusted UPWARD and it raised their monthly payments too high for them to manage.

I'd say the borrower AND the lender are guilty. The lender for lending too much to someone who couldn't afford it, and the borrower for not thinking ahead.

Answer 6

borrowers & lenders are responsible. lenders made a boatload of money selling of Adjustable Rate Mortgage loans off to the secondary market & in the excitement & pressure to make these profits, underwriting quality suffered, so borrowers who probably shouldn't have been offered loans were.

also, borrowers bought as much house as they could possibly afford while rates were low (house rich, cash poor), so when rates adjusted upwards they were caught in the crunch.

Answer 7

We are all at fault to some degree. Some of it is related to mortgage fraud, some is related to the Federal Reserve lowering rates and keeping them low so long, some is related to Wall Street bundling and selling the mortgages in portfolios that are completely illiquid, some is related to greed, some related to people borrowing more than they could afford,some to the different crazy products offered and not explained like adjustable rate mortgages that reset significantly higher than anyone could afford...etc...The real question should be...what can we do about it?

Answer 8

Lenders supplied ARM loans which have been scheduled to upward thrust in curiosity fee after a couple of years, and a entire pile of purchasers have been gullible adequate to take the ones loans. Which was once extra dull....the customer or the lender ? Flip a coin on that one.

Answer 9

Offering a loan to a person who can't afford it is like offering crack to a crack whore. The lender is responsible and should have made sure the person getting the loan was qualified - but they made money off it, so they are like the crack dealer. They don't care as long as they made money off the deal.