Stabilizing the Housing Market

Did you know that one in five Americans owe more on their home than what their home is actually worth? In 2007, tragedy struck the United States; due to lack of regulation, the housing bubble burst, leading to defaults on risky subprime loans, which induced the collapse of the investment banks in 2008. Here in 2012, Americans all over the country are still being hurt by the economic disaster that hit five years ago.

However, politicians today are attempting to hold the investment banks accountable and assist the millions of Americans who desperately need it.

Over the past few months, state regulators and officials have been talking about settlements of allegations on investment banks’ improper foreclosures of American homes based on faulty paperwork and deception of foreclosure practices through the reliance on the Mortgage Electronic Regulation System.

New York Attorney General Eric Schneiderman is one of the leading prosecutors who is suing Bank of America, Wells Fargo, JP Morgan Chase, Citigroup, and Ally Financial. This 26 billion dollar settlement will help over two million current and former homeowners who were harmed by the burst of the housing bubble in 2007.

Now, you may think to yourself 26 billion dollars? Taxpayers are paying for yet another bailout? Nope, that is the common misconception among citizens when they hear of this housing relief effort (which is the largest relief for homeowners whose homes have been foreclosed and whose debt exceeds their home value in history).

Instead, the investment banks will pay for the 26 billion dollar deal! This effort would finally hold banks accountable for their risky and corrupt actions that caused the crisis in 2007 and ultimately the recession.

So what are the benefits? Well, many economists and politicians believe that it will stabilize the housing market, aid consumers, and lay the groundwork for just practices in the future. Additionally, homeowners in trouble will receive aid and others will have their mortgage debt reduced.

On the other hand, many economists believe that this deal is not necessary and that the market will fix itself. Additionally, several wonder why banks should pay for aid and reductions for mortgages when the root of the issue was irresponsible spending and borrowing from the banks.

Personally, I think that this is a superb idea. The taxpayers are not paying, but rather the banks are—holding them responsible! Isn’t it about time that the United States hold these five banks liable for their corrupt practices?