What Is a Moratorium On Foreclosures
Uploaded by rapp2043 on Feb 10, 2009
What Is a Moratorium On Foreclosures?
The mortgage crisis in America is a political hot topic that has taken a front seat to many other topics of national importance. Even the upcoming presidential election has the potential of having this very topic at the center of each candidate’s agenda. However, with a matter of such national significance it would appear as though all most Americans seem to know is that the economy is bad and that about covers it. Many Americans are unaware of this economic crisis occurring and are even less aware of how it could affect them. Therefore, the apathetic and ignorant attitude towards such a dilemma could be explained. In order to assist in the eradication of this issue, one must examine the meaning of a mortgage and that will improve the understanding as to why foreclosures are occurring throughout the country. Furthermore, with this base understanding of this market we might better understand why Congressional and state legislators wish to place a moratorium, or temporary freeze, to the current foreclosure emergency.
What is a Mortgage?
First, let’s examine what a mortgage is. According to the Freddie Mac lending agency a mortgage is, “… a lien on a property/house that secures a loan and is paid in installments over a set period of time. The mortgage secures your promise that you'll repay the money you've borrowed to buy your home.” There are also several types of mortgages available through lending agencies as well. Some of the following are the primary options available: fixed rate, adjustable rate, balloon/reset, reverse, and the hottest one that is being talked about the subprime mortgage. This is the one that should be hit on most heavily because this is the reason for the foreclosure crisis occurring right now.
The problem with subprime mortgage lending is the fact that a subprime lender is predatory in nature, much like a loan shark. These companies prey on those who cannot receive a mortgage through mainstream companies as a result of poor credit or and/or a number of other factors. These companies then charge very high interest rates on the mortgages they extend to consumers. These interest rates are placed on the principle of the loan and essentially the individual paying on the loan will have to pay on the interest in lieu of the principle for a very long period of time. According to Reuters, “The crisis...