Banking Law

Chris Dodd is on board with his feckless leader in calling for a federally-mandated 90-day foreclosure moratorium.

Dodd spoke at the annual conference of the Connecticut Housing Coalition in Hartford. He said people facing foreclosure deserve a time-out from the process.   

"I'm willing to do whatever it takes to stop the foreclosure crisis in its tracks," Dodd said. "It's the right thing to do economically."

Actually, no it isn't. Housing Wire today ran an article about California's various legislative efforts to "stop the foreclosure crisis in its tracks." They've certainly reduced foreclosures, for the time being at least. The crisis, however, lingers.

California State Senate Bill 1137, which went into effect Sept. 8, imposes significant new requirements on lenders prior to filing for foreclosure ??? including the requirement that servicers contact homeowner borrowers to explore options for avoiding foreclosure on their primary residence at least 30 days before filing a notice of default.

According to ForeclosureRadar, which tracks and publishes information concerning loan defaults and foreclosure filings, both notices of default and foreclosure filings have dropped dramatically.

"CA State Senate Bill 1137 has rendered analysis of current activity against prior foreclosure levels useless in understanding market conditions," said Sean O???Toole, founder of ForeclosureRadar. "What is important to watch now, is how quickly lenders and trustees adjust to the new law. While it is unlikely foreclosures will return to previous levels, given the new requirements, we expect SB 1137 to have no long term impact beyond delaying the foreclosure process for homeowners, and slowing the overall recovery."

[...]

"Given the significant negative equity now occurring in most California foreclosures, modifying loans to affordable levels either requires large principal balance reductions, or extending the unsustainable teaser rates that created the foreclosure crisis in the first place," O???Toole contended.

"Wide scale adoption of large principal balance reductions also pose significant risks, as they are likely to encourage non-defaulting homeowners to default in the hopes of securing similar reductions. As such, either type of loan modification is likely to result in increased default, and/or foreclosure activity in the future, a consequence clearly not intended."

Sean, folks like Dodd don't give a fig for your unintended consequences. The fact that legislation may have pushed off the recovery by delaying the ability of the market to find a bottom doesn't mean a thing to them. Dodd's got his low-interest loan locked-in, thanks to "Tan Man" Mazilo's preferential ministrations.  The most important reason for he and his brethren to advocate delays on foreclosures is to "pump up the volume" of the campaign rhetoric so that his man wins the White House. Then, he and his cronies in the Senate and the House will use their majority rule to start investigations that will blame the opposing political party, fat cats, greedy Wall Street hucksters, predatory mortgage lenders and brokers, and everyone and everything other than the failures of members of Congress. They'll enact legislation that will help them foul all nests but their own.

Then, they'll start complaining about how lenders aren't making mortgage laons to the poor and disadvantaged. Count on it.

Well, as long as the post-election blood-letting is captained by people of Dodd's intellectual caliber and possessed of his sense of personal integrity, it should all turn out fine in the end, eh?