Compose a 2250 words essay on Effects of Foreclosures on a Neighborhood. Needs to be plagiarism free!
The sudden increase in foreclosures that started in the 1990s was largely driven by the growth of high risk, conventional subprime lending, irregular mortgage interest rates, increasing labor and material cost for new construction and uncertainty about the mortgage banking industry in general, combined to depress the new housing market (Dizikes, 2010).
The downsizing of a number of organizations was the main reason for the decreasing jobs in the early nineties. The downsizing resulted in individuals losing their jobs and the loss of income made it hard to keep up with their mortgage payments and other bills. Furthermore, the downturn in the economy resulted in decreased property values. Lower property values caused the failure of the numerous homeowners to refinance or borrow against their home equity to strengthen their debt load. Thus, the loss of a huge section of the homeowners’ income due to the economic recession and the reduced property values, resulted in many cases, is the loss of their home due to foreclosure (Schuetz, Been, & Ellen, 2008).
The problem of high foreclosure amounts in recent years has been associated with growing activity of subprime mortgage lenders that concentrate in lending to borrowers with unsatisfactory credit. The subprime mortgage started with the explosion of the housing bubble that had driven prices high in the previous decade due to the increased default rates on subprime and other adjustable mortgages offered to individuals with imperfect credit histories and lower capacities to fulfill their loans. This resulted in the trickle-up effect on the larger financial sectors as banks and financial institutions. These institutions went through liquidity problems due to increased defaulting mortgages and reduced consumer spending resulting in a severe harmful effect on the economy. .