"As long as we let the green paper to rule our world, financial crisis will come and go affecting everything around us. Therefore, we have to prepare ourselves to face the threats."
Alexander T. Hoffman
U.S. mortgages and the economic crisis
Alexander T. Hoffman
4.11.2009
We all know that the current economic crisis was caused by the housing correction, which has resulted in illiquid mortgage-related assets that are choking off the flow of credit that is the pillar of any country economy.
For most of the U.S. citizens mortgage represents the biggest and greatest ongoing each month. The subprime mortgage crisis, which began in 2007, caught most of us with our guard down. When U.S. house prices began to decline in 2006-2007, refinancing became more difficult and as adjustable-rate mortgages began to reset at higher rates, mortgage delinquencies soared. As a result, banks have tightened their loan policies and raised rates making the mortgages more expensive.
Mortgages becoming more expensive affected the whole system. The stock market was fallen and more and more companies where reducing their staff. The unemployment rate got high and jobless people who had a subprime credit were incapable of paying back their mortgage, which caused further decline of the housing market, repossession, and more expensive mortgages.
In the current economic context, paying or getting a mortgage becomes very difficult. In order to manage these problems you must first understand the costs that a mortgage implies. Go to a financial advisor that will help you understand all the costs involved in getting a mortgage and the best lender.
After that, build a sound budget management plan to see if you can pay your mortgage. If you are in the situation that you cannot pay your mortgage, review your budget and reduce your monthly costs.
We saw in the first nine months of 2009 a rebound of the economy conducted by the Obama’s stimulus program totaling $787 billion. The stimulus program is good for the short term but for the long term, it creates more debt. From 2008 until present, the money injected into the economy raised the debt for each U.S. citizen with $17,000 and is still growing. The worst part is that the crisis is not even close to an end. So, don’t let your guard down and be prepared for anything.
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