Hands-Off Policy on Bank and Government Foreclosures Needed by U.S.

by on Foreclosures

Mortgage industry experts have stated that solving the problem of massive bank and government foreclosures will require a smaller role for the U.S. government. According to them, the government should step back from the housing market and refrain from getting too involved.

A number of local analysts support the suggestion. According to them, since the industry crisis, which saw the number of foreclosed homes in Oklahoma City and in the rest of the U.S. skyrocket, the government has been increasingly insuring mortgage loans. This, some have argued, has caused massive burden on the government and, consequently, on taxpayers. Prior to the housing market meltdown, over 50% of housing loans do not carry government guarantees.

Now, more than 90% of mortgages, including those carried by bank foreclosures in Oklahoma, are guaranteed by the government. The takeover of mortgage giants Freddie Mac and Fannie Mae also reportedly cost the taxpayers over $130 billion. The suggestion of adopting a hands-off policy came after news emerged that the government is considering reducing the maximum amount of housing loans that will be provided with a guarantee by Freddie and Fannie.

According to housing market observers, the plan is meant to ease taxpayer burden created by bank and government foreclosures. The government is also said to be hoping that it will encourage the private sector to offer loans without relying on government support. Proponents of the recommendation to give the government a smaller role have argued that it will get the private sector back on its feet.

However, not everyone agrees with the recommendation. Those who oppose it have argued that it will not solve the problem of bank foreclosed homes. They asserted that if the government took a step back, investors will also likely stay away from the housing market, and this will be detrimental to the mortgage industry since investors provide the bulk of financing for banks from which they get the loans that are issued to homebuyers.

Furthermore, the move might result in further bank and government foreclosures and will put in danger the investment market supported by mortgages, critics have stated. Regardless of what will eventually be the decision of the government, analysts agree that the current condition of the housing market will be greatly assisted by more jobs.