Posted on 10/13/2010 6:44:16 AM PDT by WebFocus
Democrats are calling for a nationwide end to mortgage foreclosures. It’s hard to imagine a more shortsighted policy under our current economic circumstances.
The weekend’s newspapers were full of stories about Democrats—including the embattled Senate Majority Leader Harry Reid (D-Nevada) and Deputy Majority Whip Rep. Debbie Wasserman Schultz (D-Florida)—calling for a nationwide end to mortgage foreclosures. It is hard to imagine a more shortsighted policy under our current economic circumstances. For a party that claims it wants to put Americans back to work, the Democrats are instead advertising their willingness to sacrifice jobs and economic recovery for salvation in November’s election.
Without question, disclosures about bank employees signing affidavits without reading them are troubling, but calling these technical deficiencies in the foreclosure process “frauds on the courts” and a reason to halt all foreclosures is a reaction wildly out of proportion to the seriousness of the fault and—if it succeeds—potentially disastrous for the economy.
Clearly, people who are in danger of foreclosure will be helped by a moratorium, but who will be hurt? The first victims will be the nation’s banks—not only the large ones, but also the small ones, the local banks that kept these mortgages on their balance sheets. If they are not going to receive any revenue from these mortgages, and they cannot foreclose, they will be weakened. If that happens, they cannot continue to make loans to small businesses, to consumers, or to those people who would like to take advantage of today’s low interest rates to buy a home, whether or not it is a foreclosed property. So the foreclosure moratorium will further weaken local economies and produce yet more unemployment.
Another victim of the moratorium will be pensioners. Pension funds for public and private employees are major holders of mortgages and mortgage-backed securities. If people are not paying principal and interest on their mortgages, these funds will not receive the revenues they have been counting on to meet their pension obligations. They will be required to borrow to make the payments required, and the cost of those borrowings will weaken their long-term ability to pay.
Yet a third set of victims will be Fannie Mae and Freddie Mac. These two government-sponsored entities hold or have guaranteed well over $5 trillion in mortgages and mortgage-backed securities. Because they became insolvent in 2008, they are currently under the control of the government, and have thus far received about $150 billion in taxpayer funds to keep them afloat. If they do not receive the principal and interest on the mortgages they hold, the taxpayers’ costs for keeping them financially solvent will increase, adding directly to the enormous deficit that is already a problem for the United States. So the moratorium is another direct burden on the taxpayers.
The housing industry, which amounts to almost one-sixth of the U.S. economy, has always been the economic sector that led the United States out of recessions. This time, because of the huge buildup of weak and high-risk mortgages in the housing bubble that deflated in 2007, the housing market has been much slower to recover than in the past. This is because the inventory of unsold homes remains high, and potential buyers know that prices still have further to fall. As long as there are large numbers of unforeclosed homes—homeowners that are neither paying principal or interest on mortgages nor making their homes available for sale to buyers who will make these payments—the housing market will continue to languish, extending the recession indefinitely.
Voters who are paying their mortgages, who are looking for jobs and can’t find them, who are taxpayers hoping to reduce their burdens as well as the U.S. deficit, and all Americans who are worried about the weakness of the economic recovery, should recognize that the politicians who are calling for a nationwide moratorium on foreclosures are not their friends.
--- Peter J. Wallison is the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute.
“So a bank throws away the documentation that proves that they own the house because they want to lie about the documentation...”
LOL!
Yeah! That’s it !
They did it on purpose because they wanted to lie about it.
Boy! You’re sure showin’ ‘em now!
Agreed.
Technicalities or not, they should be observed.
I disagree with your asessment of the scope of the problem though. Just because the media can find a few people who are wrongly accused doesn’t make for a majority, or even a substantial minority.
I’m sure you’ve seen how whenever someone wants to cut welfare - jsut as an example - the media trots out the rare legitimate sob story to convince people against it.
Bottom line to me is still this (and it’s obviously a genrallization): A lot of people got in way over their heads and think nothing of using any means necessary to avoid that realization.
The whole thing is an ugly situation.
What about the tens of thousands of probable cases of Perjury by the banks, mortgage companies, and their agents? Do we give them a pass?
What about the people who are paying on their mortgages who may never be able to get a clear, unencumbered Title Deed to the homes they've been paying for for decades?
Do we let the sleazeballs skate?
There appears to be a lot of different issues involved with this whole mess.
To me it looks like mortgage companies buy and sell the debt for the interest. My mother unexpectedly paid off the last of her mortgage in one lump sum and triggered a foreclosure attempt. Somebody bought the debt expecting interest to be paid over time. She paid it all at once and someone was left holding an empty bag. The mortgage servicer dropped the foreclosure attempt but her deed is still getting straightened out.
As a paralegal working in the bankruptcy field, I have secured many deeds and mortgages. I have not run across one mortgage that has been fradulent.
Loans were given to people that didn't even have jobs or flat out lied on their applications. One report I read said there ware approx. 44.4 million mortgages in the US and of that about 9% were underwater. Underwater does not translate into foreclosures. Shutting down the whole process is absurd for the minimal numbers involved here. If there is fraud by the banks, prosecute them.
The fed has already dumped bond holder rights to the auto companies and given the assets to the unions. Contract law is becoming null and void is this country.
Why would anyone loan anything if there is no recourse?
I think the truth is that very few of the foreclosures are ‘fraudulent’. In the vast majority of cases, money IS owed. However, it sounds like the banks have screwed up the documentation - not in the sense of not having any, but not having a strong enough paper trail to allow a court-ordered foreclosure.
Don’t forget the possibility exists in this mess that a homeowner could get foreclosed on by two, three or even more “servicers†on the same property.
Don’t forget the possibility exists in this mess that a homeowner could get foreclosed on by two, three or even more “servicers†on the same property.
I’m surprised they tried to pull that on your mother. Modern mortgage agreements specifically authorize an early payoff by the mortgagee. You would think that all your mother would have to do is pull out her mortgage and point to Paragraph X subsection Y, and that would be the end of it.
“Go look for yourself and you will see that there are rising numbers of property seizures being attempted on people who are either current with their mortgages or who do not owe money on their houses.”
I say that is a crock. Got evidence?
A few calls from her attorney and they decided to drop in. However there was some insurance fraud involved too and they really didn’t want to go to court over that.
Her homeowner’s insurance was to be paid with her mortgage. At some point someone dropped the insurance and pocketed the money. A tree fell on the house and she discovered that she didn’t have insurance. Bank of America gave her 30 grand in hush money and she fixed the house and paid off the remaining 10 to 15 grand she owed.
I think you have that backwards. I'm betting most have been paying reduced amounts the banks offer in the form of Trial Modifications. It's far from uncommon for this to go on for well over a year only to have the bank then claim the borrower is unqualified for some minor reason.
Time after time and day after day, politicians of all stripes demonstrate their breathtaking lack of any economic sense or knowledge at all. They are totally bereft of common sense as well.
Well the other side of the coin is that if the deadbeats are living rent free they can go out and stimulate the economy by buying more tvs and eating out at fancy restaurants. They will have more disposable income. Maybe they will even pay down thier credit cards and pay off thier BMWs!
“What about the tens of thousands of probable cases of Perjury by the banks, mortgage companies, and their agents? Do we give them a pass”?
...absolutely not! I’m a Realtor and I gotta tell you, people are given a choice in Va to whether to purchase title insurance or not. I always suggest it but sometimes people opt out to save $900-$2000+/- and say no. That’s a real problem for them. I don’t think they deserve to lose their home, but they have made their own bed.
Also, there are several channels to go through when purchasing a home and all (at least in my experience) explain the ups and downs of home ownership. The foreclosure procedure, inspections, deeds, title, you name it.
Overly dramatic. No one is making such a statement. At least no one credible.
There is nothing wrong with taking a breather to assess exactly what's going on. I realize that would put a crimp in all those fees the Servicers are making right now, but in the long run it'll be smarter.
The major Title Insurance companies have already told the banks to take a flying leap in the case of foreclosure sales. So that product isn't even available any longer.
And we're not talking about the buyers here. We're talking about tens of thousands of probable cases of Perjery by the banks and their agents. That's damned serious and if it's true then people need to be going to prison.
Then there's the issue of 'who's got the Title?'. There seem to be many, many cases of "we can't find it" syndrome. How is anyone supposed to get a clear, unencumbered Title Deed ever?
That's damned serious, too.
These banks, mortgatge and insurance companies, and yes many, many realtors were more than happy to cash the checks for the last few years. Your entire industry is in this up to the metaphorical eyeballs.
Now you can live with the consequences of playing fast and loose for the last decade. I have no sympathy for any of you. None.
Bank of America just suspended all of its foreclosures because they themselves admitted there could be legal problems. JP Morgan Chase also halted foreclosures after they admitted they never verified loan documents. Why would these banks do such things if the problems were not that widespread?
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