No where in our society today is the actual institution of home ownership more important to secure the stability of not only local communities but for the overall economic stability and security of a nation. The realization of owning a home is so paramount to remedy this nations economic crisis that if the United States doesn’t rectify this sever crisis in practically every city this nation will be very hard pressed to ever climb out of this economic abyss. With the number of current foreclosures continually escalating the United States will never regain the economic prominence that we had during the housing boom of the 1950’s and 1960’s unless more people are able to buy and become part of that paternal brotherhood of home ownership. It is of vital importance that the more people who are able to actually purchase and stay within a home the greater the overall economic impact there will be in every local community through-out the country.
What has occurred during the last two decades is that more people are being denied the opportunity to own their own home or are forced out because of foreclosure. There are a lot of factors that have been contributing to the increase of individuals who can’t qualify for any type of mortgage or are being denied the opportunity to stay in their own home. One of the more obvious reason is the lack of middle class jobs. Ever since 1994 the evaporation of middle class employment opportunities have continued to vanish at a rate of over one million per year. This continuing erosion of middle class employment only compounds the problem in why so many people are not buying, able to by, or able to keep their homes. When job loss, stagnant wages or worse yet, reduced wages with the various types of mortgages that people get themselves into like an adjustable rate the problem of facing foreclosure is much greater now than ever before. This is what is happening today. The mortgage meltdown is crippling every community across the country.
Recent economic studies all indicate that owning a home produces long term economic growth for each local community. Individually the concept and actual home ownership instills emotional benefits of security, stability, and a genuine sense of pride. In communities where more families are owning homes the social benefits far out weigh the effects when banks or financial institutions foreclose. One of the most important social as well as economic impact of home ownership is how it affects children of families when they reside in their own home. Home ownership has proven that children perform substantially better academically in school. It has also been proved that home owners are more involved in their children’s lives especially when it concerns their education. Another fact is that home owners move less often than those who rent. This brings the stability that children need to further increase the child’s success in their school. Another study has shown that even though owning a home enhances educational standards for children the neighborhood stability that is a direct correlation with more home ownership further increases each child’s ability to succeed in school.
The communities with more occupied homes are more cohesive. Each family enjoys better communication. The overall economy is stronger and more stable when more individuals and families reside in their homes. An another economic impact is that homeowners spend more money to improve their home and are more engaged in enhancing their neighborhood. All of which spurs economic positive momentum. This in turn signifies that homeowners take more positive steps in producing better and stronger communities. When given a choice the average homeowner is 28% more likely to repair their home,15% more likely to vote,12% more likely to maintain a garden outside their home,10% more likely to be involved with local community groups like the PTA and most homeowners will live 4 times longer in a particular community. This all translates again, to positive economic growth and stability in communities where more individuals are able to buy and stay in their homes.
As beneficial as home ownership is to every local community homeowners are more active, connected and involved with their own families. Whether it is volunteering at local schools, coaching various sport teams, or becoming scout leaders are some of the types of activities that only more homeowners are active in. These types of community involvements further produce positive social and economic impacts upon all communities.
When people are able to become a home owner these individuals achieve a greater degree of life satisfaction, self esteem, and a certain perceived control over their lives. In addition to being more content with their own personal situation than renters, home owners enjoy better physical and psychological health. Where the children are concerned 20% are less likely to become teenage mothers. The escalating teenage pregnancies that are plaguing most urban areas all across the United States would fall by over 20% if the parents were able to buy, maintain, and stay on as home owners. In addition home owners have a violable financial stake in the value of their homes. We can conclude that owners have more of an incentive to deter crime by forming and implementing voluntary crime prevention programs. This reduces crime and adds more value to each home.
The bottom line is that being a home owner has a very large important impact in each neighborhood, town, city, state and through-out the country. This is because home ownership creates jobs: remodeling, landscaping, lawn maintenance, and all the other industries that are connected with owning a home. It is found that each owner generates as much as $60,000 of economic activity every year in local communities.
Still there remains a very large portion of the public that can’t qualify for a home loan, isn’t able to make their mortgage payments any more, and is trapped into high interest rates because they can’t qualify for any type of loan modification in order to be able to continue to make their mortgage payments at a reduced rate. In each case the ones that suffer are the children, local communities, surrounding townships, their state and this country. Now the question remains how to actually achieve the desired economic impact for local communities all across the United States. One that produces lasting economic growth and stability.
Up until now there has been no silver bullet for the continuing economic crisis most of which was brought on by the mishandling of mortgages’s by the banking industry. Back in the 1950’s and even through the 1970’s banks used a simple rule to qualify people for a mortgage. During this period middle class employment opportunities were still abundantly available. The corresponding salaries earned would be more sufficient for more people to be able to qualify for a mortgage. Anyone who wanted to buy a home was issued a mortgage based on the criteria that the purchase price could not exceed over 25% of an applicants gross earnings at a fixed interest rate for the life of the loan. A 30 year fixed rate mortgage was the standard home loan. Back then there were no sup-prime or adjusted rate mortgages nor were there the selling of mortgages to mortgage brokers. There was just that tried and true rule that worked for generations. It was only when banks recently tried to improve the mortgage lending procedures they realized they could reap more monetary compensation for themselves by changing the rules of lending. This is when the United States ended up with the worst economic disaster since the Great Depression.
The banking and financial industries are still continuing to thwart a swift economic recovery. This is even with these same institutions that gambled and lost with the tax paying public’s money are poised to again reap record profits. The President’s stimulus and bailouts of over billions of tax payers money still haven’t had the economic impact that was to be expected. In fact the economy nation wide is still in jeopardy. Worse still is the fact that with all the turmoil in Libya and the Mid-East today along with the disaster in Japan the United States is very hard pressed to help the rest of the worlds economies. Only when the United States implements solutions to this very crucial aspect of improving overall economic conditions by generating more home ownership all across the country will this country be actually be able to really help other struggling nations.
One important factor in considering how to increase the likely hood of more individuals able to buy a home is with reforming of credit scores. The criteria for loans today are based primarily on an individuals credit score. Trans Union, Experian, and Equifax are the reporting agencies that determine a persons or business credit worthiness. In other words the numerical score given is the basis for the amount any lending institution will give and the corresponding interest rate they are charged for the use of any loan. The higher the credit score the lower the interest rate will be and the greater amount of the initial loan they can have. The problem today is credit scores are so unreasonable for the majority of the population now. The vast majority of people are still faced with their credit scores diminishing through no fault of their own. Lay-offs, becoming ill, or even reduced incomes are all factors when faced with keeping up with the ever increasing cost of living. Credit scores have been reduced by over 150 points for just one late payment or missed payment on only one bill. So when an individual who needs to do a home re modification today, have a line of credit to fix up their home, or even buy a new car the banks are turning these people down because of their credit score. This does nothing to spur economic recovery. Credit scores should not be used as the prime determination when it comes time to apply for any loan and especially for a mortgage. Credit worthiness should be based on merit, ones current equity in their home, references, character and length of home ownership.
When banks are in position to foreclose on any ones property they have to consider two very important facts: One is that an occupied home even when the owners are in financial difficulty is much more of a factor in the overall communities economic future. When individuals are forced out of their homes due to banks foreclosing an empty home does nothing but detract from the local economy. This creates an economic domino effect in economic retardation all across the board. Two: Banks have to not be so focused on foreclosure as a means to recoup monetary loss but should work with the home owner in finding violable solutions like defer payments on a mortgage. This is in light of the fact that so many middle class employment opportunities are not available at this time. Another option is to work with the home owner in reducing their mortgage payment even though their credit scores are not in line with the banks policy for issuance of a loan or re modification of their mortgage. All of this translates that individuals or families that reside in homes offer a much better picture of economic stability in every local community.
The banking and finance community has to realize that the best way to have an immediate impact on economic recovery is to lessen the criteria on peoples credit scores so that more people will be able to receive any loan whether it is for the purchase of necessary items, stave off foreclosure, and in general stimulate positive economic growth.
In corresponding to the banking and financial incentives by reducing or lessening of credit scores the Federal Government must implement procedures and solutions to trigger more middle class job growth. This starts with reforming of our trade agreements like NAFTA. The United States must embark on a policy of Equal Trade not Free Trade that we currently have. This current trade policy has only resulted in the elimination of so many middle class wage employment opportunities all across the United States for over 20 years. With so many incomes now so reduced because of the types of jobs that are only partially being created will never amount to the kind of economic growth that this country needs. Reforming our trade agreement is crucial in enabling business to secure the economic momentum needed to create the middle class wages that are of paramount importance for more people to become homeowners. When more people are able to own, stay in or expand their homes the greater the positive economic impact there will be in every community across the United States.