October 18, 2010
The mind readers at the NYT told readers that:
“The Obama administration has resisted calls for a more forceful response, worried that added pressure might spook the banks and hobble the broader economy [emphasis added].”
It is easy to see how a foreclosure moratorium might hurt bank profits. After all, the banks could be forced to follow the same laws on mortgages and property transfers as the rest of us. This would raise their costs and reduce their profits, which is why they had been taking short-cuts instead of following the law.
However it is not easy to see the chain of events whereby a foreclosure moratorium hurts the broader economy. Certainly Housing Secretary Shaun Donovan couldn’t produce a credible story in the piece in the Huffington Post cited in this article.
Donovan uses the absurd story of a young woman who just bought a foreclosed property who he claims would have been unable to achieve her dream of homeownership if a foreclosure moratorium were in place.
Huh? Doesn’t the housing secretary know that there is a huge inventory of foreclosed homes that banks are holding off the market waiting for better times? If the pipeline of newly foreclosed homes was temporarily stopped by a moratorium, this inventory would easily keep the market well-supplied with foreclosed properties for long into the future.
And, wasn’t one of the main purposes of HAMP to slow the process of foreclosure? The argument was that this slowing was necessary to stabilize the market. Does the Obama administration want to slow or speed up the process of foreclosure, or both? And are both essential for the housing market?
This is what a reporter would be asking after seeing Secretary Donovan’s piece. (Btw, yes both HAMP and blocking a foreclosure moratorium helps banks.)
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