In his weekly radio address, President Obama said the foreclosure crisis clearly illustrated the importance of Wall Street reforms:
“We’ve seen problems in foreclosure proceedings – mistakes that have led to disruptions in the housing markets. This is only one more piece of evidence as to why Wall Street reform is so necessary”.
The President continued:
“This was a bill designed to rein in the secret deals and reckless gambling that nearly brought down the financial system”.
As near as I can tell, the jury is still out on whether the Financial Reform legislation will prevent situations like this from occurring in the future. It seems far too early to make that judgment.
The Obama Administration previously said that a blanket moratorium on foreclosures would do more “harm than good”. In an editorial in the Huffington Post, HUD Secretary Shaun Donovan expressed the administration position that:
“The Obama Administration has a comprehensive review of the situation underway and will respond with the full force of the law where problems are found”.
Despite this, the administration’s position is that a blanket moratorium on foreclosures would harm the housing market by causing the sale of foreclosed and distressed properties to grind to a halt. This is likely true, but I fear it will happen regardless of a moratorium on foreclosures or not. Some title insurers have already ceased offering title insurance on some foreclosed properties, rendering these properties virtually unsellable. There is considerable uncertainty around foreclosed properties right now, and litigation is beginning to fly. I would imagine that most people who are considering buying a foreclosed property will wait some time to make sure there are no problems with the title or the foreclosure procedure that was utilized.
Foreclosed sales make up as much as 25-40 percent of total home sales in some parts of the country. Stopping them will have a deleterious affect on the housing market. At the same time, continuing with foreclosures and possibly running roughshod over people’s due process rights, not to mention centuries of established property law is also a bad thing. There isn’t going to be an easy way out of this situation. It will be interesting to see where we end up. Stay tuned.
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