The Mortgage Crisis More than What It Seems - Essay Example

With the failing economy, mortgage lenders and banks are finding it hard to find the cash to support the foreclosures. With the low house demand and the growing defaults companies like American Home Mortgage Investment Corp. and Delta Financial Corp., filed for Chapter 11 bankruptcy protection. Bigger banks are suffering losses as they write down their losses with even a company like Merrill Lynch posting its largest loss in 94-years. The Failing Economy: With the drop in employment rates and the economy in one of its worst positions for more than a decade a recession seems to be on the way.

How bad the crisis will be and how it will alter the consumer's lifestyle is what has to be determined as the mortgage crisis takes the country by storm. Importance of the Crisis: Being a mortgage collector I have the opportunity to review some of the ARM's, interest-only and flexible payment/negative amortization loans. I have found that they are all positioned as tools to help the borrower afford the house for a moment. The financial companies and their policies have helped create a mortgage crisis without any government intervention.

It is essential that people understand what direction the mortgage crisis will go in as foreclosures and increasing interest rates undermine the basic needs of the people. To me, having a home is a basic necessity and a sub-prime borrower wants this basic need in order to create stability in all aspects of their financial life. When an economy of the nation is unable to support this basic need of the people a recession can develop that alters the society in a way that will take years to understand much like the Great Depression of the 1920s.

ConclusionWhat affect the mortgage crisis will have and how deep the effect on the economy will depend on where the house prices go in the next couple of quarters, what sort of unemployment rate the nation sees, the rate of foreclosures, and how the crisis falls into other parts of the mortgage and credit sector.