Written by: Liwin Troy Lee
The most prominent players in the Housing Crisis were the real estate agents, lenders and the unqualified buyers. The problem was real estate agents who showed and sold homes to unqualified buyers. In order to close the deal, they referred these buyers to lenders. The loans were offered at low interest rates at first and later on the interest rates increased. As a result, with higher interest rates, buyer could no longer afford to pay the money back. Furthermore, it did not help when the prices of the houses feel and the buyers wound up having to pay more for the homes than they were worth.
The end result is the homeowner has to go into foreclosure, which is when the buyer cannot pay the moment back to the lender and the lender, usually a bank sells the home. Going into foreclosure hurts the credit of the buyer and make the lenders lose money. The reason being lenders cannot sell the home in a weaker housing market. Investors also lose money when they do not get a return on an investment they thought was low risk.
The best way to prevent another housing crisis in the future is inform the buyer of the interests rate of the loan and lenders should not lend money to them if they think the buyer cannot pay them back. Investors also need to be inform about the buyers ability to pay back and should get more return if there is a high risk of buyers not being able to pay back.