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HOUSING: Foreclosure moratorium idea is crazy

Letter by William G. Bradbrooke, Tacoma on Nov. 9, 2010 at 1:50 pm with 23 Comments »
November 22, 2010 2:30 pm

Re: “State needs five-year moratorium on foreclosures” (Viewpoint, 11-9).

Dan Leahy offers an interesting solution to the mortgage foreclosure problem: Use the power of government to impose a moratorium on foreclosure actions.

If foreclosure is the one penalty lenders have to enforce mortgage contracts, and that power is suspended, why should anyone with a mortgage make another payment?

If Leahy thinks the $19.5 billion already trimmed from total home equity in Washington is large, what does he suppose the figure will be when payment of mortgages becomes “optional”? Real estate markets will simply freeze. Municipalities, which depend on real estate taxes, will see tax receipts drop drastically. Today’s cuts in government payrolls will look tame by comparison. And how many mortgages does Leahy think will be created without the ability to foreclose? And how many bank failures will ensue if his legislation passes?

Fortunately, there’s a judiciary upholding a constitution and a canon of contract law to protect Washingtonians and their property against such wild ideas. Still, it’s thought-provoking, and it’s a sign of the times. We need to think very hard before we throw down our pitchforks and march on Olympia with well-intentioned initiatives and populist zeal.

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Leave a comment Comments → 23
  1. PumainTacoma says:

    School of hard knocks says: Don’t borrow more than you can pay. Don’t ask others to pay for your mistakes. Don’t bite off more than you can chew. And for god sakes, DO NOT expect your credit to be free and clear in five years time.

    I am so tired of people who GAMBLED. Yes, gambled with their money. I do not owe you anything for your addiction. Cut the credit cards, take the bus, walk, ride your bike, go to thrift stores, and stop buying crap you can’t afford. It is your loan. OWN UP TO IT.

    As a recent sign reminded me” PUT YOUR BIG BOY/GIRL PANTIES ON AND DEAL WITH IT.

  2. Re ‘real estate tax’ aka Property Tax is paid by the home owner and is based on the assessed value of the property and has nothing to do with the house having a mortgage on not, occupied or not.

    PT – “School of hard knocks says: etc” “people who GAMBLED. Yes, gambled with their money”.

    The people who gambled away their (and others) money and needed a bailout were Wall Street, the Banks, and other lending institutions that made, backed, and traded in sub-prime mortgages.

    The majority of people who have lost, or are about to lose, their homes to foreclosure did so because they lost their jobs due to the economic meltdown brought about by the reckless gambling of Wall Street, the Banks, and other lending institutions, and the even more reckless policy of shipping American jobs overseas.

  3. donjames says:

    Uhmm, xring, the gentleman was referring to our state’s Real Estate Excise Tax… which is a tax on all real estate transactions. No transactions, no tax; savvy?

    HTH

    Bravo, Mr Bradbrooke, well said. In times like these the kooky ideas come out of the woodwork.

  4. A five year moratorium on foreclosures? You have got to be nuts.

  5. DJ – the letter writer refers to the ‘real estate tax’ which is another name for ‘property tax’ which is collected anually and provides the major share of most municipal taxes.

    The ‘real estate excise tax’ is a transaction tax and is collected only when the property is sold.

  6. xring — you’re right, but I think the letter writer meant the excise tax. Property taxes have to be paid no matter what, but the excise taxes the county collects for each sale will certainly plummet if sales cease.

  7. Ronniew – another example of imprecise terminology.

  8. aislander says:

    So, xring; it sounds like you’re arguing in favor of the foreclosure moratorium. Do you thing there is an intrinsic right to housing?

  9. aislander says:

    That should have read: “Do you thinK…”

  10. aislander — Just say xring thinks there is an intrinsic right to housing. Does it matter if that housing is a modest 2 bdrm apartment or a 2-story 4 bdrm house in the suburbs? Is this like musical chairs where whatever house you were living in when the economy crashed is the house you are entitled to keep, regardless of your ability to pay for it?

  11. aislander says:

    Good question, ronniew. Based on the outrage at income inequality, I really don’t see how housing inequality would be viewed any differently. If there IS an intrinsic right to housing, though, doesn’t that mean that there is an intrinsic right to the labor of others’, and isn’t that called slavery?

  12. Islander – No and NO. No,I’m not arguing in favor of the moratorium and NO, I don’t believe there is an intrinsic right to housing.

    However, I’m confused as to why lenders are so hot to foreclose during these hard times. Unless they are betting on a turn around in the economy and an upturn in the housing market.

  13. aislander says:

    THAT’S an interesting point, xring, and I think an argument could be made that it isn’t in the lenders’ interest to foreclose if an arrangement could be made in which they could get at least partial payments, but that would vary from case to case, and market to market. IF by foreclosing, the lender could quickly turn the the contract into cash, given the time value of money that would be a sensible decision.

    With respect to the economy as a whole, and since it was a “bubble,” which is by definition an artificial inflation of price AND demand, it is very important to arrive at a realistic price structure for housing. Allowing foreclosures to go forward is one mechanism for achieving that desirable outcome…

  14. Let me try this again. Just say Sumner believes there is an intrinsic right to housing. (Better?) Who gets to pick which house each family unit is entitled to? For some families a move from a crappy 2-bdrm apt to a crappy 3-bdrm apt would be awesome and they would be ever so grateful. For other families a move from a 3000 sq ft 4-bdrm house to a 1200 sq ft 3-bdrm would be devastating. Where would they put the “good” furniture from the formal living room?

    If, as renters, we moved every 2 or 3 years, and now we are losing the house we bought 3 years ago to foreclosure so we’ll have to move again, what’s the difference?????

  15. aislander says:

    You’re right, ronniew. Someone who puts no money down, and has no equity, loses nothing but a credit rating due to foreclosure. Should have rented in the first place…

  16. I think it’s in the lenders’ best interest to hurry up and get the foreclosures over with so we can move on. They tried modifying loans to keep people in their houses and get at least some of their money back, but most of the people couldn’t even swing the modified payments. Something like 90% of the trial modifications failed. The housing market can’t start growing again until it hits the bottom so the longer the foreclosure process drags on the longer it will be before things turn around.

  17. ronview – that interpretation doesn’t exactly fit with the facts of the massive foreclosure fraud.

    Yes – homeowners are liable but YES, the banks, who can’t even legally demonstrate that they own the loan need to be required to follow the law. If they can’t show that they own the loan – they can not foreclose without fraud.

  18. Ronn and Islander – IMO – if some owns two or more homes and has to cut back to one, that one should be the one they can afford. If that means giving up a 4-bedroom, 5,000 sq ft house and moving into a 2 bedroom, 1200 sq ft house, so be it, tough luck, and better luck next time.

    BB – good point and a most interesting question.

  19. xring — What about my next door neighbors? They currently have a 4 bdrm house they cannot afford (because they can’t take any more equity out to pay for other stuff.) If they had to move into an apartment would it really be a crisis? Lots of people live in apartments and live to tell about it.

  20. Sumner401 says:

    No school today ronnie and ailander, or just a long recess?

  21. aislander says:

    A “joke” that doesn’t amuse the first time gains nothing from being repeated…

  22. Ronn – it would be a crisis only for your neighbors. They are not the first nor will they be the last to be forced to down size the living arrangement.

  23. Sumner401 says:

    A “joke” that doesn’t amuse the first time gains nothing from being repeated…

    And yet here you are…..

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