Foreclosure nonsense

There is now a movement gaining strength among the Democrats in Congress to stop all foreclosures on houses across the country for some period of time like 90 days. This moratorium is supposed to address the issue of whether or not banks have filed for foreclosure on houses using defective papers which have not been adequately reviewed by them. Perhaps the funniest part of this mess is that the bank which is most often cited as acting improperly is Ally Bank which used to be called GMAC and which is owned mostly by the government. Other banks are involved as well including Bank of America.

The idea of a moratorium is close to insane. We already have millions of people who cannot pay their mortgages. Many have already lost their homes in foreclosure. Others will soon follow suit. There are no allegations that people who are continuing to pay their mortgages are being wrongfully forced from their homes. The issue is the quality of the papers that are being used to foreclose on those who have not been making their payments. According to the hyperactive trial lawyers, these poor quality papers are a "fraud" that has to be stopped. In truth, this purported fraud is just another attempt by the trial lawyers to get another fee in a slow market. So the effect of the moratorium is two fold: first the Democrats think that it will make them look like they care about the people who are being foreclosed upon (rather than the truth that they are helping their trial lawyer allies). That is bad enough; in fact, this is the true fraud of this problem. Second, however, a stop to the foreclosures will greatly prolong the process of righting the housing market. The overhang of distressed properties will be out there for months or years longer. The banks who lose money each month when no payments are made will be hit. The homeowners who do make their payments but who want to sell their homes will get less. Some shaky financial institutions will go under needlessly, and the FDIC will have to bail them out. The housing construction industry will stagnate for more months and years. In short, there will be real damage to the economy and more jobs will be lost. And the Democrats will do all this to help trial lawyers? Why?

To be clear, I am not advocating throwing people out of their homes if they have a valid defense to a foreclosure action. Any such defense can be presented in court right now. There is just no need to stop all foreclosures because a government owned bank could not use the correct papers. The government made this mess; it should not clean it up on the backs of the American people.