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.
- Do You Support a National Moratorium on Foreclosure? (abcnews.go.com)
- Foreclosure Snags Could Spell Big Trouble For Banks, Economy (forbes.com)
- Legal Heat On Robo-Signing Stokes Foreclosure Fiasco (forbes.com)
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