Foreclosure Bailout Mortgage

Foreclosure Bailout Mortgage
foreclosure bailout mortgage
foreclosure bailout mortgage
foreclosure bailout mortgage

Big Banks Profit from Consumer Foreclosures

Big Banks Profit from Consumer Foreclosures

The mortgage crisis is one historical event that people will be talking about for generations to come. Not only did the situation come close to plunging the world into a second depression, it was a clear and unmistakable example of corporate greed. To recap the events surrounding the mortgage crisis, several large banks began lending money to high risk individuals to buy homes. The majority of the home loans were set up with an adjustable rate mortgage (ARM) which meant after a certain amount of time, the interest rate would increase or decrease depending on what was happening in the real estate market.

 The banks would then sell securities to investors backed by these high risk loans. At the end of 2006, the house bubble burst. Homes began to lose their value at alarming speeds. At the same time, the interest rate on many of these home loans shot up. Both of these events led to people defaulting on their home loans in record numbers. Investors began losing money as well. To stem the flow, banks began refusing to lend money to anyone including each other. This caused a domino effect which ended with several large banks declaring bankruptcy and being forced into liquidation.

With the banks refusing to lend money, businesses were unable to get the operating capital they needed. Additionally, consumption dropped and companies began laying off employees. Without any way to pay their mortgage, more people foreclosed on their homes which further pushed the economy into a downward spiral. To prevent a complete economic meltdown, the government loaned money to the banks and several large businesses in order to prevent these companies from going bankrupt as well as to stimulate the economy. The banks were supposed to use the money they received from the government to provide loans. Instead of doing so, however, many of these banks used the money for other purposes including paying their management millions of dollars in bonuses.

Foreclosures continue to occur in record numbers. In 2009, it was discovered that many of the banks were illegally seizing homes. Additionally, the loans themselves had been sold to different investors which meant that the banks were foreclosing on loans that they did not own. Although the government has tried to step in and prevent these abuses from happening, they continue to occur. According to one estimate over $9 million homes have been foreclosed on since 2009. On the other hand, banks that received the TARP bailout have been consistently posting profits. While most of them have paid back the money that was loaned to them, most have resisted doing anything to help owners stay in their homes.

Oscar E. Diaz

About the Author: Oscar Diaz is a lawyer with 22+ years of experience in Corporate, International and Tax Law. He is licensed and admitted to practice law in Venezuela only. This article constitutes an opinion, and is not legal advice in any way. If you need legal advice, you should contact a lawyer licensed in your state and/or country. Oscar Diaz is not selling, promoting and/or marketing any legal service. This article is for informational purposes only.

About the Author

Oscar Diaz is a lawyer with more than 20 years of experience in Corporate, International and Tax Law. He is licensed and admitted to practice law in Venezuela only. He was included as one of the "150 Best Lawyers in Latin America", by Abogados LatinoAmerica, in 1999.

Would I have been better off buying a house I couldn't afford?

I bought a house last year. And get this, I bought a house that I am able to afford to pay for. crazy, I know. This mortgage foreclosure "bailout" is making me feel like I would have benefited more if I had bought a house that i couldnt afford. I could have just waited for the government to save me from my irresponsible decision. Shouldnt responsible home buyers be given some help if irresponsible ones are?

I hear that. We also turned down our dream house in favor of one we knew we can afford. At least we know we did it without help. You did the right thing not spending beyond your means.

Bailout, Mortgage Fraud- BB&T Bank, Predatory Lending, Subprime