The Federal Housing Administration Commissioner, David Stevens, has joined David Axelrod in stating that the Administration sees no reason to halt all foreclosures. That’s not a surprise in itself–it was pretty clear that Axe’s statement reflected official Administration policy.
But I’m particularly interested in how Stevens justified this position in an email sent to the WaPo.
“We believe freezing foreclosures for all banks in all states, whether we have reason to believe them to be in error or not, is simply not the prudent step to take in this fragile housing market,” he said.
With approximately one in four homes sold in the second quarter in foreclosure, administration officials worry that a moratorium could have a significant impact on the economic recovery.
“While we understand the eagerness to make sure that no American is foreclosed upon in error, we must be careful not to over-reach and apply a remedy that will make the underlying problem of foreclosures worse,” he added.
First, note where Stevens places the benefit of the doubt. If the Administration has no reason to believe foreclosures to be in error, then it will assume they are not. That, in spite of the mounting evidence that the paperwork problem for homes sold during the bubble is systemic.
Foreclosures have been halted in places where there is an easy means (judicial foreclosures) to expose the fraud underlying the bubble era housing sales, or for companies (like Bank of America) that were pressured to vouch for the whole system. But there is no reason to believe the loans Wells Fargo acquired from Wachovia are any more sound than what BoA has on its books; on the contrary, they’re probably worse. But the Administration position is that we should just carry on with the foreclosures, ignoring the evidence of systemic fraud.
Which is probably, itself, just an effort to avoid admitting to the evidence of systemic fraud.
While the interim paragraph in Stevens’ response to the WaPo is not a direct quote, it seems that he is saying the Administration doesn’t want to halt all foreclosures because they don’t want the housing market to lose a quarter of its sales. That is, they seem to believe that the housing market will freeze up if it doesn’t have a ready supply of below market properties to entice buyers who otherwise would be unable or uninterested in buying.
Now, first of all, it’s not entirely clear that the housing market hasn’t effectively frozen up in any case. Things are so volatile it’s not clear that this quarter would resemble the second quarter in any case.
But given everything else, is it really a good idea to encourage reluctant buyers to buy now? (I say that with a house on the market.)