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OPPOSING VIEW: Suspend evictions for now
So, for now, some beleaguered homeowners will be spared the misery of losing their homes. Further, banks will be forced to comply with the law and follow their own procedures, as they should be. People will get due process. But despite the revenge-of-the-downtrodden theme, the latest home loan fiasco seems destined only to make the nation's housing problems worse. That will be especially true if lawsuits, investigations and calls for a nationwide moratorium on foreclosures cause the entire process to grind to a halt.
For all the uproar, there is precious little evidence so far that people who are current in their payments are being mistakenly targeted for eviction. In the end, those who cannot afford their houses will probably still lose them — only the process will now be dragged out, preventing the real estate market from arriving at two things necessary for a recovery: a bottom in prices, and a sense of certainty that the market is functioning properly. Some previous buyers of foreclosed homes might even face title claims.
Even buyers and sellers of properties that have never been in foreclosure have an interest in seeing the process start working again. Absent a functioning foreclosure system, mortgage lending will continue to be sluggish, and so will the overall economy.
To be sure, these problems are entirely of the lenders' making — the latest example of banks trying to cut corners at their customers' expense. They created foreclosure procedures without investing in people and systems to swiftly and efficiently usher the process through the courts. When the system got swamped, they just ignored their own rules.
But except in cases where someone can show that the sloppiness in processing — including "robo-signers" pushing through unread documents — is causing injustices to innocent homeowners, foreclosures should continue. Rather than push for nationwide gridlock, as several Democratic officeholders and consumer groups are doing, lawmakers and state attorneys general should be focusing on how to get the system working again.
In a best-case scenario, the moratoriums of individual banks would be lifted in the coming weeks and the process of working through hundreds of thousands of soured loans in a more equitable way would get on track. The worst-case scenario would be that the system by which banks have electronically registered the transfer of mortgages among themselves would be called into legal question, throwing millions of pending and completed real estate transactions into an extended state of uncertainty that will prolong the housing downturn.
Should the banks be punished for their latest irresponsibility? To some degree, that's happening. Having to hold onto non-performing loans hurts their profits. But, as usual, the public pays a bigger price as the foreclosure glut slows lending and keeps houses off the market, where buyers who were prudent enough not to take on bad loans are waiting.
More sluggishness and uncertainty are the last things the shaky economy needs right now.
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