Running head: THE IMPACT OF MORTGAGE AND REAL ESTATE FINANCE CRISIS

The Impact of Mortgage and Real Estate Finance Crisis on the United States Economy
Archibald Ihegaranya

Capella University

Running head: MORTGAGE AND REAL ESTATE FINANCE CRISIS

Over the last decade, especially in last five years the premise has been, one of where you are, where you are going and how you plan to get there. This intriguing situation has become prevalent in the mortgage, real estate, and finance arena for individuals, communities and the United States economy. The impact of the subprime mortgage crisis has infiltrated every aspect of our economy. In this respect Crawford (2008) opined that this is probably the worst economic condition ever since the Great Depression era. This dilemma has been broadcasted nightly into our living rooms by grim faced reporters. In an attempt to inform the public, descriptions of our economy in crisis is illustrated through reference to the run on the bank scene so memorably and indiscriminate lending tactics and practices. The easy money lending policies of the mortgage community has had a devastating impact on the lending institutions, the real estate market and on the investing community. The reasons are complex and varied, with all the key players willing to point the finger of blame to anyone but himself or herself (Crawford, 2008, p. 56).

Conceptual or Theoretical Framework

Basu (2009) observed that, recent debacle in the financial markets has opened up a plethora of issues that require serious attention from all market participants. Perhaps the most serious concern is the emergence of mixed economy where government owned enterprises will coexist with private enterprises. The historical performances of such economies have been dismal. The debacle is also bound to usher in additional regulation of financial markets. The new regulations are likely to focus on ways to control the possibilities of similar failures in the future. Thus, the ramifications of the debacle require our attention and understanding, especially the possibilities of
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Running head: MORTGAGE AND REAL ESTATE FINANCE CRISIS

the existence of a regime of both high inflation and high market volatility (Basu, 2009). The financial crisis, the calamity, is what economists term a structural change, as also emphasized by Crawford (2008). Economists are fascinated by structural changes and generally talk in abstraction when they discuss issues of a structural change in the economy. An example of such a real shock was the bursting of the dot-com bubble in the year 2000 Crawford, (2008).

Statement of the Problem

In the wake of such financial catastrophe, the authorities should be on the look-out for potential risks that can trigger huge losses. This is clearly a daunting task, as policy makers face obvious limitations. Authorities hardly have knowledge that is superior to that of market participants, home ownership strategies, investing innovations and typically, most economic agents do not recognize bubbles as they develop, which is one condition for the persistence of bubbles, as also observed by Sanchez (2011). Widespread underestimation of risks was certainly the case in the global and national crisis. In this context, Sissoko (2011) reported that warned of increased risks before the problems arose, their admonitions were widely ignored. Thus, the fact that most authorities miscalculated the risks in the crisis is worrisome. Hence, this study believes that the inability to detect incipient problems and the moment it takes for any economic policy to exert effects restrict the scope for corrective measures, where lags can even make them counterproductive. For example, reviewing the financial stability reports of 47 central banks published in 2006, in the wake of the crisis, finds that "virtually all 97 percent started off with a positive overall assessment of the domestic system - (Sanchez, 2011, p. 527). In addition, major financial institutions contributed to the growth of the total U.S. mortgage debt outstanding, as their share rose from $355.9 billion in 1970 to $4857.2 billion in 2009. Commercial banks were
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Running head: MORTGAGE AND REAL ESTATE FINANCE CRISIS

accounted for originating most of the mortgage debt outstanding held by major financial institutions in past recent years, as their relative share increased 20.60% in 1970 to over 78% in 2009-( Sissoko, 2011, p. 45).

Management or Research Question

The focal research question identified for this study is:

Is there a relationship between financial and economic meltdown, disaster, debacle and the individual home-owners, investors and the general economic responsibility?

There is a problem in/for individuals, communities, and the U.S. economy. Despite the financial regulations, the meltdown and disaster, this problem has negatively affected homeowners, investors and the economy because of lack of knowledge and information. A possible cause of this problem is ignorance. Perhaps a home ownership study that investigates general behavior could remedy the situation. About 87% of this population was in distress either through home ownership or in real estate or some form of financial involvement. This intractable question is: What are the implications of the overall crisis for business leadership, as also questioned by Jackson (2010) in his studies. But are they adequate? Have they warped our vision in some important way? The above identified questions will be inquired into through this study.

Justification
Environment has never been more conducive for a judicious improvement in online survey sampling approaches. As major portals such as Yahoo, AOL, and Google garner more traffic from an ever-increasing diversity of households Sanchez, Gonier, (2011). Online researchers can draw
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Running head: MORTGAGE AND REAL ESTATE FINANCE CRISIS

samples from these arrays of respondents as they flow to and from online sites, instead of overfishing captive respondent pools. Major online portals are attracting well over 100 million unique visitors per month, and each of these unique visitors is a potential research respondent, if properly recruited and validly assigned to studies. An important key to the online sampling methods advocate is an incentive schema that is balanced, well timed, is universally and nationally appealing Stafford, Gonier, (2011).

Research Method
Qualitative analysis coupled with Quantitative analysis will be adopted in realizing this study.

This will be my primary methodology to best address the research question. Scholarly journals, books, articles of course peer reviewed will be highly engaged. Despite their relatively short history, Web surveys have already had a profound effect on survey research. Couper, Miller, (2008). Netscape Navigator following in 1994 and Internet Explorer in 1995. The first published papers on Web surveys appeared in 1996. Since then, there has been a virtual explosion of interest in the Internet generally, and World Wide Web specifically, as a tool for survey data collection. This is not to say that the early claims that Web surveys will make all other methods of data collection obsolete have happened. However, it is fair to say that the methodological attention that Web surveys has received and exceeded other modes in a similar period. In part, this is because the relative cost of Web surveys makes them a more accessible method of data collection than telephone or face-to-face surveys. In addition, the computerized nature of Web surveys facilitates conducting Couper, Miller, (2008). experiments and speeds the process of collecting data, leading

Running head: MORTGAGE AND REAL ESTATE FINANCE CRISIS

for better or worseto more research papers in a shorter time frame and with verified validity (Couper, Miller, 2008, p. 832 ). Moreover efforts would also be made to engage the Social Constructivist or Interpretive lens in combination with the Sources, Recruitment and Sampling when and should the need be necessary Mckenzie, Lee,

References
Basu, S. (2009). The New Economy. Journal of Financial Service Professionals, 63(6), 56-64. Couper, M. P., & Miller, P. V. (2008). Web Survey Methods. Public Opinion Quarterly, 72(5), 831-835. Crawford, C. J. (2008). The Impact of the Subprime Mortgage Debacle on the Financial Community. Proceedings of the Northeast Business & Economics Association. Jackson, K. T. (2010). The Scandal beneath the Financial Crisis: Getting a View from a MoralCultural Mental Model. Harvard Journal of Law & Public Policy, 33(2), 735-778. McKenzie, B., & Lee, C. K. (2007). Report of an Experiment in the Development

of a Constructivist Curriculum in Environmental Marketing. Business Education Digest, (16), 17-28

Snchez, M. (2011). Financial CRISES: Prevention, Correction, and Monetary Policy. Cato Journal, 31(3), 521-534. Sissoko, M. (2011). Co integration and Error Correction Modeling of Macroeconomic
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Running head: MORTGAGE AND REAL ESTATE FINANCE CRISIS

Predictors of Mortgage and Credit Card Loans Charge-offs in the U.S. Commercial Banking Industry. Review of Business Research, 11(3), 44-58. Stafford, T. F., & Gonier, D. (2007). The Online Research "Bubble. Communications Of The ACM, 50(9), 109-112.