Mortgages Essay Example | Topics and Well Written Essays - 1000 words

Mortgages - Essay Example These compound problems have worked to create a situation in which many homeowners have found themselves holding on to high interest rate mortgages for homes that are worth less than they owe to pay off their mortgage. Such a situation is known as an â€Å"underwater† mortgage. Due to the fact that different political parties have sought to take advantage of this misfortune by seeking to capitalize on the rhetoric surrounding the issues as a way to drum up support for a given candidate, the problem has been exacerbated as the federal government has furtively toyed with different types of interventions only to do little if anything to ameliorate the root problem. Thus, this brief essay will consider whether homeowners with subprime mortgages should be allowed to force their lenders to renegotiate their terms. The answer to the question is somewhat more complex than a simple ‘yes’ or ‘no’. From a purely economic point of view, the individuals who agreed on the home loans at the bank’s terms and conditions have entered into a legally binding contract that they had every opportunity to review and seek to understand prior to signing on the dotted line. In this way, a degree of culpability must be accepted by those mortgage holders that initially accepted the terms and conditions, regardless of whether they were too lazy to take the time to read and fully understand them (Richardson 87). From the bank’s point of view, much of the problems associated with the high number of subprime mortgages that had to be completed were a result of the unnatural legislation (Dodd-Frank) that was forced upon the banks as a means to fulfill a certain type of quota with reference to those within society that would otherwise never be able to afford or quality to purchase/borrow a house of their own (LaCour-Little et al. 88). In this way, it is impossible to blame the entire situation on the financial institutions themselves as the governmen t had a heavy role in creating such a crisis in the first place. From the individual borrower’s point of view, the banks instituted extraordinarily high interest rates due to the fact that they considered these subprime borrowers to be of an extreme default risk (Hill 49). In a way, these extremely high rates were nearly self-fulfilling prophecies due to the fact that as soon as the economy began to cool, the first individuals that were going to feel the crunch were necessarily those that had borrowed to the max and were going to have hardship making sure that their high interest rate mortgage is paid every month. One might rightly question why it should be incumbent upon the financial institution to renegotiate a signed and legally binding contract that has already been agreed upon with a terms of either 15-30 years. The answer to such a question can actually be found outside of forcing the financial institution to renegotiate the loan terms (An et al. 546). As such, a litan y of refinancing offers exists for qualified individuals. Those rates that were common during the early 2000’s have dropped to record lows within the past several years. The issue with such refinancing offers is that they invariably require a large amount of start up costs associated with actually changing the loan from one lender to another.