In 2007, the US economy entered a mortgage crisis that caused panic and caused other financial problems. The mortgage crisis was a result of too much borrowing and flawed financial modeling, largely based on the assumption that home prices only go up. The problem in this economy is that foreclosure rates were a few years ago at an all time high, where banks couldn’t afford to give out anymore loans and were increasing Americans mortgages. This caused a financial meltdown where not only was the housing crisis hitting families hard but the rest of the financial institutions were as well. Banks were being shutdown, major companies were collapsing, gas, oil, and food prices were all at an all time high. So naturally families couldn’t afford the already dramatic increase in their mortgage which they had no choice but to foreclose their home and let the banks take over. In March 2008 about 65 percent of all homeowners-52 million had mortgages. One-eighth of those mortgages were subprime loans issued in 2005 and 2006. A recent study by the Pew Charitable Trusts projects that those subprime loans will end in foreclosure for 3 percent of current homeowners-2.3 million with the majority occurring within the next two years. Nonetheless, a few states are being hit hardest. Arizona, California, Florida, and Nevada together accounted for 25 percent of mortgage loans but 42 percent of loans entering foreclosure in the first quarter of 2008. Only seven states have yet to respond to the mortgage crisis. Fourteen states offer direct financial assistance to homeowners, and twenty-one states have introduced outreach programs to alert homeowners to the dangers of subprime mortgages and ways to prevent foreclosure. Thirty-three states provide foreclosure prevention counseling to troubled borrowers. Thirty-seven states have passed laws regulating foreclosure rescue transactions, foreclosure notification and timing, or high-cost lending practices. The federal...
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