Politicians are playing politics with foreclosures. Because banks used inappropriate “robo” checkers, unqualified and only rubber stamping paperwork on foreclosures, politicians are jumping on this to stop all foreclosures that were rubber stamped. Of course, the practice was wrong and the investigations will need to be done.
The banks that did this need to be stopped. But, as with most political investigations, this will be interminable. In the meantime, hundreds of thousands of foreclosures that need to happen will not happen.
What is the downside of this? Thousands of people who can’t afford the house they occupy will continue to occupy the house and pay nothing. Many of these mortgages are insured by Freddie, Fannie, and the FHA. Today, 98% of new mortgages are being insured by these three institutions. Banks will bleed red ink. The government institutions that are up-keeping the houses will bleed more red ink. People that need to move on and find a place of residence will not move on. Houses that need to be put on the market to reduce the glut of unsold houses will not be sold.
When politicians play politics with something like this the focus is always on the problem and making sure the villains are clearly identified and chastised never on finding an expedient solutions.
Banks already teetering on the brink of financial disaster will be pushed back over the brink for the second time. Real estate values will drop. Your tax dollars will once again pay for someone to stay rent free in a house they can’t afford. It”s 2008 all over again.
Keep a close eye on which politicians are milking this situation. They are disingenuous. They are making a bad situation worse by using it to get publicity and votes. Also, watch those who are trying to tell the story in factual terms. Those who recognize the potential danger from delaying the inevitable. Those few who are tying to find a quick solution to the problem, not delaying a solution.
Those who are the rare few who can resist a quick appearance on TV and really want to protect jobs and the financial institutions and your tax dollars. These are the people who really understand the problem and know the real risk of making the problem linger and get worse.
