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Foreclosure Moratorium Would Be ‘Catastrophic'

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        <p>While calls for a <strong>foreclosure moratorium</strong>
continue, some are warning that stopping all foreclosures is a bad idea
– a very bad idea.</p>
<p>In fact, it would be disastrous, says Tim Ryan, president and CEO, the
Securities Industry and Financial Association (SIFMA).</p>
<p>"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.</p>
<p>The <a rel="nofollow" onclick="javascript:_gaq.push(['_trackPageview',
'/outgoing/article_exit_link/3482911']);"
href="http://www.totalmortgage.com/current-mortgage-rates.asp"
title="Current Mortgage Rates">mortgage</a> market, investors and the
health of the economy, he points out, are all inter-related.</p>
<p>"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."</p>
<p>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.</p>
<p><strong>Avoiding Extra Damage</strong></p>
<p>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."</p>
<p>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.</p>
<p>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."</p>
<p><strong>Foreclosure-gate Scandal</strong></p>
<p>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.</p>
<p>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.</p>
<p>"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.</p>
<p>While banks halt their foreclosures, they continue earlier steps
leading up foreclosures.</p>
<p>"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.</p>
<p>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. <a rel="nofollow"
onclick="javascript:_gaq.push(['_trackPageview',
'/outgoing/article_exit_link/3482911']);"
href="http://www.totalmortgage.com/durefi-mortgage-
rates.asp?campaign=blog" title="Learn how to refinance">Learn how to
refinance</a>.</p>        <!--INFOLINKS_OFF-->
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posted:7/14/2011
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