Foreclosure Moratorium Would Impose Huge Losses on Taxpayers
“Taxpayers and the federal government would be among the biggest losers if officials heed calls from some legislators and homeowners rights groups to stop millions of foreclosures across the country because of possible paperwork problems,” reports the Washington Times. “The Treasury Department is majority owner of one of the biggest mortgage companies, Ally Financial, formerly GMAC.”
“Despite much political posturing over improperly assigned foreclosure documents, ‘robo’ signatures and other irregularities . . . there does not appear to be any substantive questions’ about the legal rights of banks and investors to foreclose against long-delinquent homeowners in most cases,” said Ed Pinto, a mortgage analyst and former chief credit officer for Fannie Mae (a position he held back in the days before it began buying up and mislabeling vast numbers of subprime mortgage loans, leading to its current taxpayer bailout).
A moratorium would also impose huge losses on investors and retired people. As noted earlier, if your 401(K) has shrunken recently, it may be due to falling bank stocks, like Bank of America stock, which has fallen from over $19 a share to less than $12 a share over the last six months. Many if not most 401(K)s indirectly own Bank of America stock, through their mutual fund holdings. Its stock value has fallen due to the possibility that paperwork errors and securitization may thwart repossession of homes though foreclosure. Law professor Richard Epstein says a halt to foreclosures would be a disaster for “prudent borrowers and lenders,” while AOL’s Marty Robins says it would delay “economic recovery” and increase mortgage “interest rates.” A news story illustrated the negative ripple effects of halting foreclosures. Bank of America also reported a $10 billion loss due to restrictions on debit cards contained in the 2010 Dodd-Frank Act, restrictions that will also harm consumers.