Damaged Foreclosure
Foreclosure Moratorium Would Be ‘Catastrophic’
While calls for a foreclosure moratorium continue, some are warning that stopping all foreclosures is a bad idea – a very bad idea.
In fact, it would be disastrous, says Tim Ryan, president and CEO, the Securities Industry and Financial Association (SIFMA).
“It would be catastrophic to impose a system wide moratorium on all foreclosures and such actions could do damage to the housing market and the economy,” Ryan said in a statement released today.
The mortgage market, investors and the health of the economy, he points out, are all inter-related.
“Investors in the housing market – including American workers with pension funds, 401k plans, and mutual funds – would unjustly suffer losses in their savings from these actions,” Ryan said. “Increased uncertainty in the securitization market would further constrain consumer credit and spending, dampening our already unhealthy economic situation.”
In other words, while banks are seen as impersonal entities eager to seize homes, the actually lenders are investors who own mortgage-backed securities, including people who own mutual funds.
Avoiding Extra Damage
Any mistakes in the process should be corrected, Ryan said, without causing “unnecessary damage is done to an already weak housing market and, in turn, that there is no further negative impact on the economy.”
At least some politicians believe a foreclosure moratorium is a bad idea. A foreclosure moratorium would send tell lenders that they should not risk lending to people who need mortgages, Eric Cantor, a Republican Congressman from Virginia, said on Fox News Sunday. “You’re going to shut down the housing industry, if that’s the case,” he said.
Although top Democrats have called for a blanket foreclosure moratorium, the Obama administration, showing some sense, came out against the idea. Valid foreclosures with their paperwork in order should proceed, a senior White House advisor said on the “Face the Nation” television program on CBS. Questions on home foreclosures, he said, have already “thrown a lot of uncertainty into the housing market that is already fragile.”
Foreclosure-gate Scandal
The so-called “foreclosure-gate” scandal centers on allegations that mortgage servicers, such as Ally Financial (formerly GMAC), used “robo-signers,” people who approved thousands of foreclosure documents without actually reviewing them.
Many companies, such as Ally Financial and JPMorgan Chase, said they are stopping foreclosures in judicial states, states where foreclosures must be approved in court, to check their paperwork procedures. Bank of America said it will stop foreclosures in all states.
“We will stop foreclosure sales until our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for foreclosure decisions are accurate,” Bank of America said in a statement.
While banks halt their foreclosures, they continue earlier steps leading up foreclosures.
“In almost all cases there are no factual disputes about whether the mortgage is delinquent, the amount of the arrears or whether foreclosure is proper,” banking and housing trade groups stated in a letter to Congress sent Friday.
Most foreclosures are uncontested by borrowers, stated the letter from Financial Services Roundtable, Mortgage Bankers Association, and Housing Policy Council. The trade groups say banks are doing what they can to modify mortgage terms and offer refinance mortgages to help homeowners avoid foreclosures. Learn how to refinance.
About the Author
Michael Kling is the web editor and contributing web content writer for Total Mortgage Services, LLC, as well as all related sister sites. Total Mortgage Services, LLC is an industry leading mortgage broker and lender headquartered in Milford, Connecticut.
2010-06-16 Destroyed REO Home / Foreclosure Damage / Homeowners Revenge
