Most of these families, before the economic meltdown, were able to make their payments and live a relatively comfortable middle class lifestyle. With more Americanís finding themselves unemployed or under-employed, they are also finding themselves seriously behind on mortgage payments and facing foreclosure. However, in some cases these same people bought homes that they couldnít afford but were lured into these deals with interest-only or adjustable rate mortgages. These adjustable rate mortgages or ARMs were designed to give middle class families the opportunity to pay extremely low monthly payments in the short-term and then after anywhere between two to five years payments were set to double or triple.
While many major financial institutions began to hand out these risky mortgages, there were others in the industry dividing up these mortgages and selling them to other banks with what they called derivatives. However, the number of these failures was woefully underestimated and the capitol to back them up was nonexistent. Still others took out insurance policies on these derivatives, which were designed to pay the claims for the holders of these notes when these loans fell into foreclosure.
Once these mortgage payments increased many people, with the loss of a job, or because they believed that when the time came they would be able to make the increased payments, started to fall behind on mortgage payments. Now they were not only facing foreclosure but were also seeking tax debt relief - a double financial whammy. However, the major blame canít be placed on the individual because there was more at play that most people were completely unaware of during the real estate boom.
The economic disaster was a perfect storm creating devastating consequences for individuals caught in the middle. Yes, some blame can be placed on people who bought more house than their salaries could sustain but more realistically it was the overarching greed of those in the financial industry. Now, too many middleclass families are seeking debt relief help due to falling behind on mortgages. And with little investment in small and medium sized businesses to add jobs for the unemployed or under-employed the rebuilding of the U.S. economy will take years to recover.
The economic crisis became a major focus in the national news and dominated the congressional agenda for weeks as lawmakers debated the reasons that taxpayers should bear the burden of the financial meltdown. The middleclass citizen was asking all the right questions but in most cases it was too late to avoid the problems for thousands of families across America. Anger, disbelief, and more questions about how the richest country in the world could be facing financial ruin were reported from those on main street as well.
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Article Added on Sunday, May 9, 2010
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