Will Halting Foreclosures Fix The Economy?

By
Real Estate Agent with Keller Williams Realty

I doubt it. The way I see it, a temporary moratorium on foreclosures, like the one recently implemented by Bank of America, will only delay the inevitable. It's like removing a band-aid: whether you rip it off swiftly, with full force, or gently, slowly, and little by little, it still hurts.

Recent allegations that Bank of America utilized 'robo-signing' on foreclosure documents to commit fraud and forgery caused the second largest bank in the country to throw out the white flag and halt foreclosure proceedings until it can accurately assess its policy and procedure related to proper foreclosure documentation.

Additionally, President Obama refused to sign proposed legislation last week that would have made it more difficult for homeowners to challenge documents in a foreclosure.

It's not to say that there haven't been errors in the foreclosure process or that every homeowner who is upside down on their mortgage doesn't deserve to be dealt with fairly and honestly. It's just that halting foreclosures will only delay the pain,  while bringing focus to the minutiae rather than the fundamentals that created the mortgage meltdown in the first place.

The bottom line still remains that the banks and government policy makers have got to end their stand-off, develop loan modification and short sale standards that are effective and executable, and develop assistance programs that keep as many additional homeowners from foreclosure as possible. Once stabilization in the housing market is achieved, consumer confidence will return, increasing consumer spending, thus restoring jobs and sending people back to work, thereby returning the economy to a healthy state.

With nearly 13 million U.S. homes carrying negative equity and billions of dollars of unmitigated damage on the banks' books, we are a long way from seeing this type of healthy growth in the economy.  "Extending" the mortgage crisis and "pretending" that it's not as bad as it seems is a bold step in the wrong direction, with myopic focus on the wrong factors. The longer we tourniquet the problem, the longer we will have to deal with the consequences of our wrongful actions, dragging us further down an economic black hole. The utter magnitude of the national mortgage crisis makes it unlikely that the problem will go away soon or see a smooth resolution. I see no other way but to face the battle head on, with innovation and courage. Let's hope our policy makers come to feel the same way.

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Rainmaker
288,797
LaNita Cates
REMAX of Joliet - Joliet, IL

I agree with you 100% Bree. It's still going to happen and if anything, it's going to make a lot more people feel they don't have to do anything with payment or leaving because they can just point their finger at their lender and blame them. Our banking system is a circus.

Oct 13, 2010 09:41 PM #1
Rainmaker
435,055
Jim Patton
Century 21 M&M - 209-633-2839 - Turlock, CA
Realtor - Stanislaus & Merced county Realtor.

Bree - This will definitely not fix our economy.  All these upside down home owners are not going anywhere, it is only delaying the inevitable.

Oct 13, 2010 09:50 PM #2
Rainmaker
518,705
Jeanne & Ralph Janisch ABR CRS Brokers
The Durango Home Team at Keller Williams Southwest Associates - Durango, CO
Selling Durango CO homes to good people like you!

The timing on the halt seems to me to be just a pre-election ploy to make politicians appear to be trying to help beleagured homeowners while nothing can be further from the truth.  As soon as the elections are over you will see the foreclosures resume with a vengance.

Oct 13, 2010 10:30 PM #3
Anonymous
Couldn't Agree More!

http://www.youtube.com/watch?v=Z7vXP3tHzhA

 

Oct 14, 2010 12:17 AM #4
Rainmaker
231,257
Lisa Delzompo
PRW Lending, Inc - Temecula, CA
VA, FHA, Conventional

I agree - the vast majority of foreclosures result only after homeowners have failed to pay on the mortgage for months, even more than a year in many cases.  If that is not the case for a particular homeowner - he always paid on time and was foreclosed - then of course let's investigate those cases.  If homeowners want to fight the technical process but still would have had numerous months' payments stacked onto the original loan they couldn't afford, I think an in-depth investigation will only be costly and delay the inevitable.  Homeowners should be looking to get short sales to go through rather than let the home foreclose, hoping to get a short sale letter that relieves them of further liability (which a foreclosure absolutely will not do).

Oct 14, 2010 12:48 AM #5
Rainmaker
438,638
Marcy Moyer
Keller Williams Realty Palo Alto Probate & Trust Specialist - Palo Alto, CA
CDPE

Lisa,

It appears that after an intial knee jerk reaction about how banks should stop the process there is now a braoder consensus that it would be bad for the country as a whole to stop this.

Oct 17, 2010 06:29 PM #6
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Rainer
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Bree Long

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