One arm of the government’s bank regulators has called for the thrifts to halt foreclosures. Meanwhile, yesterday Treasury and HUD talked with the banking industry in search of ways to stem the cascade of foreclosures.
The thing that was striking was the uniformity of support for the idea that we can no longer rely on a voluntary system” under which the financial services industry leads the foreclosure prevention effort, said John Taylor, president of the National Community Reinvestment Coalition.
Halting foreclosures is a beginning to addressing the problem. The government was once again suggesting buying up the pools of tainted mortgages as the end game. Huh?
If there is a foreclosure in process, the homeowner doesn’t care who owns the note. He needs a way to dig out of the mess, as to his house. While buying up toxic mortgages may, over time, restart lending, it will be too late for the borrower who is behind on a property that is now underwater. There will be no new mortgage money for that family. (Remember too what happened, or didn’t happen, when we gave banks money to restart lending).
In the absence of a solution that impacts existing homeowners, more houses go into foreclosure, depressing the prices of surrounding homes. Properties are neglected, vacant, and sold at fire sales. It hurts even families with sound finances.
Judicial mortgage modification snuck into the last paragraph of the Post’s story. I say let’s start there, and see if we really need to relieve buyers of toxic mortgages.
