Foreclosure Solution: Government Move To Curb Interest Rates Will Help Reduce Foreclosures

In recent days, stocks soared following the announcement of Fed rate cut and the jubilation continued on Wall Street while the investors placed bets that the worst of the financial crisis spurred off by the slump in the real estate market may finally be over.

You may be aware that the Fed cut its federal funds rate, which has now made stocks turn volatile across the world. Meanwhile, the Central bank made it very clear that it will keep a close eye on the subprime mortgage mess, foreclosure filings and its spillover into other areas of the credit markets.

While most economists welcomed the movie, a few obviously didn’t. named. There were those who were critical that the Fed cut should just have provided a quarter point rate cut to soothe the markets instead of opting for impulsive risk taking and placing the financial markets under risk too. A few economists were keen to point out that the rate cut could reignite real estate frenzy once the current mortgage problems subside. There were those who stated that despite the rate cut, the economy would still go through a cloudy period of protracted slowdown. With that in mind, aggressive lending practices probably won’t return.

But the rate cut was triggered mainly because the housing segment was overburdened with extreme foreclosure activity. Most homes were being returned to the crocus of unscrupulous lenders when borrowers failed to catch up on their mortgages.

In recent times, foreclosure rates soared so much that even the White House had to finally take notice and think of initiative to combat the depressing scenario that was affecting hundreds and hundreds of home owners.

President Bush suggested some reasonable initiatives to curb foreclosure listings. These initiatives are listed below:

Increase transparency in lending practices. This would definitely bring down the number of borrowers facing the loss of their precious homes in the future.

Increase help provided by Federal Housing Authority for struggling house owners.

Suspend tax liability when borrowers lose their home through a short sales process.

Combat predatory lending practices. A lot of lenders could be penalized for exploiting and illegally extracting huge sums from struggling owners.

Build a coalition of communities to help struggling house owners. This would facilitate making credit available as well as counseling borrowers on credit issues.

With highly divisive opinions on this topic, it is not clear whether the economy is bound to go through cloudy times or not. But one thing is definitely certain. For the house owners, it’s a bright summer day with the sun shining like pure gold!

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