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Economics and the Foreclosure Crisis

Throughout the last three decades, the United States experienced a substantial economic expansion. With more spending power than ever before, people began to seek larger purchases. Most of these significant purchases require the use of credit, and real estate is perhaps the most notable market which uses credit. Banks saw the great potential for profit, and sought to grant as many home loans as possible during this period of great wealth. Gradually, banks began granting loans to less qualified customers. After all, this inflationary period would continue forever, right? This is where the foreclosure problem began. The expansion ended, and a recession began. Suddenly, thousands of lower-income loan clients found it impossible to make payments on loans they should never have been granted to begin with. This problem must be resolved, and the nation must restructure itself so as to ensure that a similar event never occurs again.
To begin, one must examine the roots of the foreclosure problem. Like most issues, it is two-sided, and both sides must share the blame. Lenders know very well …

 

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