The first mortgage forclosures are just the tip of the iceberg. What are the banks and mortgage companies who hold the second mortgages on these default properties going to do? Believe me, I am betting that over 50% of these properties have second mortgages or inflated lines of credit on them. You know the “home improvement” credit lines that were obtained for a vacation.
I know we all hate Obama, but what they are trying to do is slow down / halt foreclosures.
The thought process is that until home prices stabilize, the banking industry is in trouble.
Even though it is good policy to avoid personal debt, business's depend upon leveraged money (the banks) to keep going.
So, stopping foreclosures stabilizes home prices, which stabilizes banks, which allows them to loan to business's, which, hopefully, will keep us out of a 30 year economic decline.