Foreclosure Moratorium Would Be 'Catastrophic,' SIFMA Says

Halting foreclosures across the nation would be "catastrophic" for the economy, a financial industry trade group said Monday.

Tim Ryan, CEO of the Securities Industry and Financial Markets Association, released a statement in which he warned that stopping foreclosures nationwide would cause far more harm than good. His statement comes three days after Bank of America, which Reuters' Felix Salmon points out is a member of SIFMA, announced it was halting its own foreclosure proceedings in all 50 states. Last month, JPMorgan Chase and Ally's GMAC said they were stopping foreclosures in the 23 states where foreclosures are processed in court.

"It would be catastrophic to impose a system wide moratorium on all foreclosures and such actions could do damage to the housing market and the economy," Ryan said in the statement. "It must be recognized that the mortgage market, investors and the health of the economy are all inter-related."

Salmon, of Reuters, says Ryan's statement obscures the true problem by exaggerating the consequences of a foreclosure freeze. Mortgage servicers' first priority should be to resolve the shoddy paperwork issues, and a moratorium might actually help them do that, Salmon says. He adds that it's not clear a "system wide" moratorium would hurt the housing market in a significant way.

Bank of America, JPMorgan and GMAC have put the brakes on foreclosures because some of their employees have admitted to not properly reviewing foreclosure documents that they approved, meaning that some foreclosures could be illegal. Intensifying doubts still further, bank agents have changed the locks on houses that aren't in foreclosure and may have stolen valuables from certain homes. Ryan said errors need to be corrected but cautioned that a national moratorium isn't the solution.

Still, President Obama's top political advisor David Axelrod expressed reservations about a nationwide foreclosure moratorium, albeit to a much less extreme degree than SIFMA's Ryan, when he said Sunday on CBS's "Face the Nation" that he was "not sure about a national moratorium because there are, in fact, valid foreclosures that probably should go forward."

At least two-thirds of state attorneys general will jointly investigate foreclosure fraud, Reuters reported Sunday. Senate Majority Leader Harry Reid (D-Nev.) expressed his support of a nationwide foreclosure moratorium after Bank of America announced its freeze last week.

Comments

[Bertski]

09:44 AM on 10/16/2010

Okay, simple solution time:
Obama holds a press conference and announces that there will be no moratorium on foreclosures. Instead, effective immediately, a policy will be enacted where any firm not doing complete due diligence in the foreclosure process, resulting in a wrongful foreclosure, will be responsible to pay the injured party the full market value of their property plus a non-negotiable fine of five million dollars. No lawyers, no lawsuits, no appeals, nothing.

Watch how fast the i's get dotted, the t's get crossed, and there is little doubt that every future foreclosure is legitimate. The only way to handle the rampant corruption is to make the penalty for the behavior far more costly than the potential profit.

[themagicdog]

12:47 AM on 10/16/2010

When the banks say jump, both Democrats and Republicans answer, "How high?" No difference between the parties at all.

[rory talbot]

05:52 PM on 10/14/2010

Foreclosures hit an all time high (AGAIN!)...and Obama/Geithner still do NOTHING except carry water for Wall Street and Big Banks. Two words: ENTHUSIASM CANYON!

[lost souls rembrd]

04:41 PM on 10/14/2010

Gee. To me it is really elementary:

If Wall Street is proclaiming doom and gloom, I say then do THE OPPOSITE!

String 'em up and just walk away. Greed is an insatiable appetite. There is never enough to satisfy greed. Never. Just ask Californians, if they even know their in debt to the tune of $38B

[wrightj]

02:52 PM on 10/14/2010

Of course it would be catastrophic. For then we will open up the can of worms full of fraud, negligence, incompetence, bribery, collusion, and other forms of corruption rampant in the financial sector and most likely in our corporate sector. For sure in our governemnt sector too. They can't hide these lies forever - they are oozing out of thew woodward everywhere like a cracked dam ready to burst and the pressure to get to the truth is overpowering the rich and powerful by the second. Soon we will see the depth of this corruption and I for one want the death sentence for those involved. Greenspan, Phil and Wendy Graham, Paulson, Dimon, Rubin, Clinton, Bush, Geithner, Summers - just to name a few of those who knew what they were doing and pushed deregulation on the legislators.

[henrypapillon]

01:42 AM on 10/14/2010

Yes, everybody may stay in their homes, but the Wall Street cats wouldn't get their bonuses.

[Scent]

06:48 PM on 10/13/2010

Yes. Of course.

And the BIRU (Banking Industry Robbing Union) sees it as totally unfair that banks have guards and safes. The money should lie around for the taking for those criminals too.

In both cases a gang of criminals demands we let them make more "profit" more easily.

[Alien Nation]

02:42 PM on 10/13/2010

As if having your house taken away isn't catastrophic.

[InLosAngeles]

02:33 PM on 10/13/2010

The foreclosed homes should be given to those people who are current. Problem solved.

[SamEasy]

12:20 PM on 10/13/2010

They should forclose on Wall Street and shut it down. This would prevent that largest fraudulent scams from happening.

[Veri]

11:03 AM on 10/13/2010

And Turbo-Tax Timmy 'Mr Spreadsheet' Geithner chants in unison over The Great Alter of Global Wall Street.

[Billy Jack]

09:16 AM on 10/13/2010

Again I ask, how does throwing people out on the street help the economy?

[Billy Jack]

09:15 AM on 10/13/2010

Why should we listen to a Wall St trade group?

[mamacat]

08:37 AM on 10/13/2010

Given Wall Streets recent record of making money through illegal activity, I am inclined to believe that any time a headline says that Wall St. is against something, it is better for Americans if we are for it.

[Billy Jack]

09:16 AM on 10/13/2010

Agreed

[cef911f1]

08:45 PM on 10/12/2010

Four words come to mind, "The sky is falling!"

[Bertski]

09:48 AM on 10/16/2010

I have visions of the gloom-and-doomers painting "Told you so" on the backs of their "The sky is falling" and "The end is nigh" signs. Sadly, they may be right at this point.