Though experts recognize that the mortgage relief bill is not thorough, recognize that it remains the best latest attempt to address the current housing crisis facing the nation. A crisis that has continued to dominate the United States presidential debates as well as make it increasingly difficult for the homeowners to repay their loans. To understand the depth of the crisis and the latest efforts to correct the situation, it is important to look at what mortgagee is and how it operates.
Mortgage is simply the use of ones property to be security to a house loan. A mortgage transfers the legal rights of ownership to the pledged property to the lender in case the payments are not made as per the agreed terms. Such a loan is made in the understanding that the security shall revert back to the owner once the terms of have been fulfilled. To most people, mortgage is associated with real estates. It is a contract that involves a number of legal participants among them landowners who is referred to as the mortgagee and the borrower who is the mortgagor.
Another term that comes into play in the mention of mortgage is foreclosure. Foreclosure simply refers to a situation where a lender terminates the contract after the failure of the mortgagor to stand by the agreement terms. This is usually in the direction of a court order. In foreclosure, a bank or any other financial institution that extends credit facilities repossesses a property if the homeowner is unable to comply with mortgage requirements (Carmen & Rogoff 12).
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Currently there exists a subprime mortgage crisis in the United States. This is a crisis that can be evidenced by a liquidity problem existing in banks after a high default rate in mortgages leading to foreclosures. The current mortgage crisis is seen to have largely been caused by subprime lending which simply is the act of advancing loans to individuals whose creditworthiness is uncertain or wanting due to a low income. It is this subprime lending that contributed to the bulk of the total foreclosures in 2007, over 43%,despite the fact subprime lending were only 6.8% of all lending in that year (Stokes & Mechem).
The current economic recession in the united state has tarnished Bush’s presidency with most tracing a link to the hefty spending in the war. Bush insists that the slump is a s result of the mortgage crisis. That aside, he has received immense criticism for how he has handled the crisis and for not coming up with any concrete plans to ease the situation. He is also accused of standing by the big corporations instead of helping the low income group deeply embroiled in the crisis.
This is a result of his stand in opposing the mortgage relief bill, a bill that has recorded considerable gains in the house. Though the bill has its flaws, it is seen as a reprieve to millions of homeowners who continually face the risk of foreclosure. The mortgage relief bill is aimed at providing tax reprieve to homebuilders. The local governments will be funded to rehabilitate deserted homes. Those that oppose the bill claim it is wrong spirited and will set a bad precedence of forcing “one neighbor to pay for the mistakes of another” (Anderson)
Bush is opposed to the bill referring to it as a “bail out”. Some Republicans see it as forcing the 95% of homeowners that did it right to pay for the 5% that got it wrong.
It is important to note though that the bill will pave way for a possible road to recovery and will go along way in preventing a further economic slump. Economists warn that if the situation is not arrested in time, it would degenerate to the worst debacle for the housing and the banking industries.
It is apparent that the nation is reeling from the effect of a mortgage crisis that has been caused by increase in foreclosures as a result of subprime lending. Though the government is yet to come up with a comprehensive plan to arrest the situation, the mortgage relief act is seen as a step towards the right direction and might go a long way in easing the pressure off the homeowners and builders through a tax break.
Aleis Stokes & John Mechem. Delinquencies and Foreclosures Increase in Latest MBA National Delinquency Survey. Mortgage Bankers Association, 12/6/2007. Retrieved on 13th May 2008 from http://www.mbaa.org/NewsandMedia/PressCenter/58758.htm
Scott Anderson. Bush administration opposes Democrats' mortgage relief bill. CNN.com Edition. Sat April 26, 2008. Retrieved on 13th May 2008 from http://www.cnn.com/2008/POLITICS/04/26/house.mortgage/
Carmen M. Reinhart and Kenneth S. Rogoff . Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison.. Analysis of Harvard economists. February 5, 2008, 12
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