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Why Oppose The Foreclosure Moratorium?

Libby Kane
Libby Kane
Posted on Oct 11, 2010

THe Foreclosure Moratorium Isn't A Popular Move.

Foreclosures are awful. So why not stop foreclosing? That’s the question being asked—and answered—as the government and lending banks consider a foreclosure moratorium. Such a move would halt the foreclosure proceedings that ripple across the country, but hardly anyone seems in favor of doing so.

The Fighting Is Over Money

It is worth remembering that the powers that be aren’t exactly advocates for social justice. Right now two of the loudest voices against the move are the White House (of course) and the Securities Industry And Financial Markets Association—a “major securities lobby,” says Reuters. Now, let’s keep in mind that a lobby exists to sway legislation in its favor, and in this case that favor lies with securities and their investors. The lobby has fitful visions of both lenders and the housing market losing money… not so much of the individuals keeping their homes. And while we like to think that the White House is on the side of “the people,” there are many people, with many different interests, represented in this debate.

Fraud Accusations Spur Action

One of the issues is the accusations of banks using fraudulent paperwork in order to foreclose properties. Because of this, major banks have been instituting their own foreclosure moratoriums. Bank of America was the first to do so in all 50 states, but major lenders such as JPMorgan Chase are following their example and suspending foreclosures in the states where judges must approve foreclosures before they’re completed. The Senate and House represent both sides: some worry about the lenders, and some worry about the families experiencing foreclosure.

Everyone Plays A Role

We aren’t lenders, and we aren’t the government. We also aren’t real estate analysts or the leaders of civil protests. From the sidelines, we can’t say who is right and who’s wrong, who will prevail, or what the long-term effect of such a decision might be. But we’re marking the characters in the show we’re watching: the government, the banks, the investors, the lobbyists—and remembering that everyone has an agenda. And they’ll push for their own interests, and claim it’s in ours. But after years of losing money, losing jobs, and losing homes, how much difference can one act make? In The Great Recession, the foreclosure moratorium is only a plot twist.

Tell us in the comments: Is the foreclosure moratorium a good move? Who are you in this story?

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  • DollarSigns

    Stop foreclosing homes? Way too good to ever actually happen. PS How can banks have so much fraud? For goodness sake!

  • Buy American

    During the last depression, the Frazier-Lemke Moratorium Act of 1935 halted foreclosures on family farms for a three-year period, provided that a local court of law would give its approval both as to the propriety of the delay and the adequacy of the rental to be paid in the interim. Frazier-Lemke was challenged in the courts, u201cbut the Supreme Court upheld the law in Wright v. Vinton Branch of Mountain Trust Bank of Roanoke. After expiring in 1938, the act was renewed four times until 1949, when it expired.rn Forgive my oversimplification for the sake of clarity: rnPerson wants to buy a home so goes to a bank & “borrows” the money & borrower agrees to pay bank back with interest…pretty standard so far…the bank then SELLS the mortgage, as a MBS (Mortgage Backed Security) to an investor, thereby removing said mortgage from the bank’s balance sheet.rnThe bank has already been paid for the borrower’s mortgage when it was sold to an investor & the bank now acts as a “servicer” on behalf of the investor.rnWhen the financial crisis hit we the taxpayer, via AIG, who had insured the MBSs of a massive amount of these investors, paid 100 cents on the dollar for these securities thereby making the investor whole.rnAlso, the FED bought over a trillion dollars worth of these MBSs.rnSo at this point we have a borrower who owes X amount of dollars but the bank has sold the mortgage and the investor has already been made whole. So who is getting the borrower’s money if they are in good standing and making payments or the home if they are in foreclosure?rnNot the bank, they sold the mortgage, not the investor because the taxpayers already paid them….rnAnswer is: that money is no longer owed to anyone if that mortgage was either insured by AIG or purchased by the Federal Reserve. The taxpayers already paid for the home, & not just subprime, also well performing mortgages. If the money is owed to anyone it’s the taxpayers.rnIn fact, if you are making a mortgage payment, your mortgage was probably paid off by taxpayers through AIG or the FED 2 years ago and you don’t even know it!rnSo who is getting all this money from mortgage payments? rn rn

    • Guest

      Great great point

    • JoJo

      Waht is your background? How do you know so much about the topic?

    • Susan J

      I am certainly not

    • MomTown

      Thanks to you for clarifying this

      • Juno

        Agree

  • JaneCramer

    i hate big banks

  • LearnVest Fan

    This is the rgith thing to be dicussing

    • Guest

      More of this please, with smart people like @buyamerican weighing in

  • LoveLV

    Thank youLV

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