Housing Crisis

Over the past two years the housing market in the U.S. has been declining. This is due in no small part to the sub-prime, adjustable rate mortgages that were issued. Both the banks who were lending mortgages and the homebuyers who were consuming them were irresponsible. The banks were not being upfront with the terms of the loan. They were hiding the fact that the interest rates would double after two years. In addition to this, they did not check the homebuyers' records to make sure that they would be able to pay off what they borrow. At the same time, the homebuyers were not being reasonable and taking out mortgages for homes within a price range they could actually afford.

This cannot be allowed to happen again, so there must be consequences. If businesses are not given penalties, they will continue to operate in a manner that risks upsetting the entire economy due to carelessness and extreme greed. However, if no help is given to these companies they will likely go out of business. This would, in turn, lead to workers losing their jobs. This would create a vicious cycle that would drag the economy headfirst into another depression. The best way to fix this problem is for the government to punish the businesses enough to get the point across, while not punishing them so much they will close their doors.

The government should make the banks that have problems with sub-prime mortgages rework their deals to make them work. This would cause the banks to lose profit (as a punishment), and also help them not to go out of business. However, the homeowners should not get off scoff-free either. They should be made to stay in the house they have the mortgage on and make sacrifices wherever possible to pay off the loan. This would mean that they might not be able to buy all the things they want to, but they would still have a roof over their heads.

In this manner responsability would be brought back to the housing market. With repercussions to all parties they would think twice before being so irresponsable and, in theory, will not do it again. The economy will be saved serious strain and possible depression. In the future, I would suggest reconsidering the system we use to give out mortgages. Possible limit the amount of mortgages banks can sell. This would make the banks check the buyer's records more thoroughly.