Foreclosure Policies

Posted on March 11th, 2009 by saman

Since the first months of this year, the Phoenix market has inclined downwards by 22%, in conformity with the National Association of Properties in the U.S. In San Francisco, the situation is similar, with 19% less in the first 6 months of the past year.

In California, Nevada and Florida there were detected the most cases of foreclosures because many people lost their houses. This is the result of the severity of laws there. For instance, in California, if the owner delays the payment of the rates with 117 days, the property is put for sale.

Henry Paulson, who works as Treasury Secretary in the US, made an announcement on Wednesday, declaring that the government renounced at the plan of buying from banks foreclosed homes that are impossible to be sold and he suggested that it would be wiser to invest the money straight in the account of such organizations.

As AFP witnesses, Paulson estimated at a meeting with the press that presently the appropriating of those foreclosed houses from the banks does not represent a satisfactory use of the supply of money given by the Congress in order to sustain the economy. Additionally, Paulson says that direct acquisitions of possession shared by parts of financial organizations are a faster and more effective way of using the new benefits to help the system of finances.

The U.S. appointed person showed hostility towards this idea for a long period, but in the middle of October, he changed his mind, and he announced a plan of activities through which U.S. will directly take equity in banks of not more than 250 billion dollars.

Henry Paulson said that assets that are not liquid would not be bought anymore, and as for the foreclosures, it is stated that the most important needs of non-financial organizations will be taken into account.

Paulson added that the strategies intended to permit access to consumer credit apart from the banking system would be reconsidered. He also particularly mentioned the vehicle part of loan market, loans for students, and cards available only in the bank.

The American appointed person also said that means to decrease the danger of execution would be continually sought. He repeated, actually, the engagement that the authorities had taken to prevent depletion, which could be the equivalent of endangering the financial system.

Lastly, we have assisted to a violent disorder on the markets from all over the world, given the context of emphasized fear for the entrance of U.S. economic system in the foreclosure crisis. All Globe round, capital and currency markets have been strongly affected not only in the emerging countries, but also in the developed states. Furthermore, massive liquidity was forcefully injected in the currency markets by the central banks in order to create a balanced situation between them.

In addition, the most important fee of the monetary policy had to be lowered by the U.S. FED, in an effort to counteract negative consequences that the foreclosure crisis has on the economy. The actions of the central banks that try to help the market competitors who have bound themselves into risky attempts to earn considerable yields have been severely criticized.

Moreover, in 2000, in the U.S., low prices of the interest rates were the principal cause of the so-called condition of “bubble.” Thus, the lower interest rates are the ones that could activate a new “bubble” to aggravate the present situation.