Mortgage and Housing Crisis in the United States

Introduction

Much has been written on the impacts of the US mortgage crisis on the global economy. Financial experts have warned that the impacts of the US housing and financial crises might persist if the necessary policies are not implemented (Kolb 6). As a result, adjustments in the financial institutions have been inevitable. Most mortgage lenders have tightened their lending rates to survive in the changing markets. Several financial experts believe that the effects of the current US mortgage crises are far much worse than stated by government economists (Hawtrey 34).

Objectives of the investigation

Through these studies, our team aims to present concrete evidence on how housing and financial sector policies contributed to the recession. Similarly, we will identify several ways stakeholders responded to the crises. Through these initiatives, we plan to shed more light on the effects of the Mortgage and Housing Act in the U.S. The act was enacted to encourage low-income citizens to acquire more houses at fair prices (Krugman 15).

Through the study, researchers expect to identify how the act has achieved its intended objectives. Our investigation team will analyze how the federal housing program has survived, despite the enormous challenges from the critics and economical challenges (Wolch & Jennifer). The research team will analyze data from the past census, responses from local residents, and evaluations from the housing experts. By doing so, they will be able to come up with appropriate recommendations.

As previously stated, the housing and financial boom in the last two decades led to a dramatic increase in mortgage innovations (Phillips 89). Through the study, we try to identify and analyze the determinants and repercussions of mortgage choice advocated by the government. This investigation will be carried out using the equilibrium models with respect to the incomplete market (Palumbo 32).

The models will enable researchers to evaluate the effects of mortgage financing assessments in a dynamic economy. The researchers will illustrate the influence of various contract characteristics on mortgage choices. Consequently, the team will assess the effects of housing and financial crises on governments, organizations, and households. In general, the research tries to explore various ways the recession has affected the government, stakeholders, and households.

Literature review

In the US, housing and financial sectors contribute significantly to the growth of the country’s economy. In the early 1990s, the US government started an initiative to enable low- class citizens own more homes (Marshall 23).

Through this process, the government-mandated all the housing stakeholders to reduce their mortgage requirements. In the year 1992, the US government through Fannie Mae and Freddie Mac acquired loans from mortgage banks and mortgage brokers. Through this move, more secondary mortgage markets were created (Marshall 34). At that time, regulations required GSEs to allocate 30 % of all the mortgages purchased as affordable housing loans. This requirement was not adhered to, and in the year 2007, financial experts noted that the percentage had risen to 55% (Marshall 45).

In the years 2007 and 2008, the long boom in the housing sector ended with the onset of the global financial crisis (Francis 12). The catastrophe and the subsequent recession had negative effects on the US housing and financial sectors. The crises resulted in a dramatic increase in default rates. An increase in the default rates occurred because most of the homeowners were among the worst-hit individuals by the recession.

Notably, most of the homeowners had no retirement accounts (Parker 67). With no retirement accounts, these individuals were left with no equity against which to access mortgages. Owing to this, affected individuals were left with no other choice but to default. The crises affected the US government, organizations, institutions, and households. Economists noted that the effects of the crises affected all persons, regardless of whether or not they had participated in the growth of the housing sector (Ellis, 78). As a result, most of the gains made prior to the recession were reversed.

Collection of data

Our research team will work closely with local authorities to assess regular returns from the housing and finance sectors. By doing so, we expect to collect appropriate housing information for further evaluations. Through this approach, we will evaluate the effects of market contraction resulting from the recession. By doing so, we will identify several housing market factors affecting the local authority’s revenues (Smith & Beverley 124). Similarly, we expect to identify how local property tax revenues contribute to the current GDP. With this information, we will correlate the findings with the existing information prior to the recession. Through this, we will be able to conclude whether the current contraction in the housing sector has been influenced by the recent economic meltdown.

To access the extent of the current housing crisis in the US, we will conduct interviews and questionnaires with various sectors, organizations, and households affected by the crisis. To collect the data, two questionnaire approaches are to be used, namely, web based questionnaires and paper –pencil questionnaires. Web-based questionnaires will employ the use of email to reach out to our prospective respondents. Therefore, our respondents will be required to log into a secure website and fill in a feedback form. We preferred this approach to other approaches due to its effectiveness and flexibility. Using this method, we plan to reach out to numerous respondents within a short period, saving on the cost of data collection. Similarly, the respondents will not only find the method interactive but also less detailed hence enhance their feedback.

Another appropriate data collection method selected by our team leaders will be achieved through conducting interviews. The data collection team will employ the use of computer-aided personal interviews to reach out to more respondents. Through this, respondents are required to key in their feedback information into a database, based on the questions requested in the database. This approach will not only save on time but also save on the cost of collecting and processing data.

How we plan to use the existing data

Using the existing data, we plan to assess the extent of the current housing crisis in the US. The team will analyze several affected sectors, and evaluate how the mortgage markets behaved all through the recession. Through this, we will note how the government and other stakeholders responded to the crisis. As noted earlier, the existing information will guide us to identify and evaluate trends in the mortgage markets for the last decade (Lybeck 123).

We will identify various factors that led to strong and long-lived growth in the housing sector. Thereafter, using the existing information, we will analyze the causes and effects of the recession. By analyzing previous similar catastrophes, our team will be able to determine the extent of the damage done by the current recession (Smith & Beverley 100). Similarly, we are planning to assess the magnitude of the housing crises on the annual revenue collected by the government and the local authorities. This will be realized by analyzing the changes reported in the annual property tax revenues.

By doing so, the team expects to identify and reveal the effects of the estimated policy offset magnitudes (Dowd 56). Equally, using the existing information, we will make use of graphs and figures to illustrate housing and financial sectors’ growth rates prior to the recession period. The graphs and figures will be submitted to the relevant authorities. These illustrations will be used in the evaluation and initiation of necessary changes needed to thwart the recurrence of the situation in the future.

Source and types of data

All through the research, we will be mandated by the scope of our research to refer to several types of data. The team managers will ensure that suitable sources are selected for appropriate evaluation. Our team leaders have identified several institutions as our sources of information. Among the institutions selected are the American Community Survey, Soma of Market Absorption, Residential Finance Survey, Property Owners and Managers Survey, and Government Surveys (Calverley, 23).

The American Housing Survey organization will provide us with information on housing costs, house sizes, and the quality of the houses currently available in the US market. Similarly, the Survey of Market Absorption organization will provide us with information on the residential sub-market (Bainbridge 123). To analyze the current housing reports and price indexes, we are going to consult with the Bureau of Consensus. With their aid, we will scrutinize various housing statistics in the country for the last 10 years.

From the collected data, we would compare the current housing conditions with the past housing conditions prior to the recession period. Collected data, existing data, and data from survey organizations can be collectively tabulated for easy evaluation and comparison. It is for this reason that we will emphasize the authenticity of all the sources, for us to achieve comprehensive and valid results (Arestis & Karin 67).

Conclusion

As discussed in this paper, housing and financial sectors contribute significantly to the growth of the country’s economy. Therefore, through our research, we will urge the US government to provide its citizens with more comprehensive information on the two sectors. Providing citizens with appropriate information on the country’s mortgage terms will ensure that they make rational assessments. As reported in the media, most housing consumers are unaware of the various market dynamics. Similarly, we urge the government to encourage innovation in the housing sector to improve its productivity.

With respect to the current housing and financial crises facing the US, we will urge the government to concentrate on how to fix the situation through appropriate legislation. In the research studies, we will suggest and develop models to be adopted by the banks and other mortgage lending institutions. Through this, cases of housing defaults will be reduced significantly. Similarly, we would advise banks to lend their mortgage based on an individual’s ability to pay, rather than based on their credit score.

Equally, we would urge banks to review their lending policies to suit the changing market dynamics. In addition, we would encourage more researchers to focus on housing affordability measures. With appropriate funding and investigations, new developments, and better understanding of the housing and financial sectors would be achieved.

Works Cited

Arestis, Philip, Peter Mooslechner, and Karin Wagner. Housing market challenges in Europe and the United States any solutions available?. Basingstoke: Palgrave Macmillan, 2009. Print.

Bainbridge, Stephen M.. Corporate governance after the financial crisis. New York: Oxford University Press, 2012. Print.

Calverley, John. When bubbles burst surviving the financial fallout. London: Nicholas Brealey Pub. 2009. Print.

Dowd, Douglas Fitzgerald. Inequality and the global economic crisis. London: Pluto Press; 2009. Print.

Ellis, Luci. The housing meltdown Why did it happen in the United States?Basel, Switzerland: Bank for International Settlements, 2008. Print.

Francis, Andrea. Affordable housing: the continuing search for solutions : proceedings of the National Housing Trust’s 20th anniversary housing symposium. Kingston, Jamaica : Planning Research Dept., National Housing Trust, 1996. Print.

Hawtrey, Kim. Affordable housing finance. Basingstoke: Palgrave Macmillan, 2009. Print.

Kolb, Robert W.. The financial crisis of our time. New York: Oxford University Press, 2011. Print.

Krugman, Paul R.. The return of depression economics and the crisis of 2008. New York: W.W. Norton, 2009. Print.

Lybeck, Johan A.. A global history of the financial crash of 2007-2010. Cambridge, UK: Cambridge University Press, 2011. Print.

Marshall, John. The financial crisis in the US: key events, causes, and responses. London: House of Commons Library, 2009. Print.

Palumbo, Michael G., and Jonathan A. Parker. The integrated financial and real system of national accounts for the United States does it presage the financial crisis?. Cambridge, Mass.: National Bureau of Economic Research, 2009. Print.

Parker, John. Turmoil in U.S. credit markets recent actions regarding government sponsored entities, investment banks, and other financial institutions : hearing before the Committee on Banking, Housing, and Urban Affairs, United States Senate, One Hundred Tenth Congress, second session… 2008.. Washington: U.S. G.P.O., 2010. Print.

Phillips, Kevin. Bad money: reckless finance, failed politics,and the global crisis of American capitalism. New York: Viking, 2008. Print.

Smith, Susan, and Beverley A. Searle. The Blackwell companion to the economics of housing : the housing wealth of nations. Chichester, West Sussex, U.K.: Blackwell, 2010. Print.

Wolch, Jennifer R., and M. J. Dear. Malign neglect: homelessness in an American city. SanFrancisco: Jossey-Bass Publishers, 1993. Print.