Except for bankruptcy attorneys, most want the massive spike in foreclosures to end. However, it is impossible to wish foreclosures away or for that matter legislate them away. Unfortunately, economic illiterates do not understand the dynamics.
Please consider CA Lawmakers Impose 90-Day Foreclosure Moratorium.
California is imposing a 90-day moratorium on housing foreclosures under a new law that takes effect Monday.
The law is expected to make lenders try harder to keep borrowers in their homes. Loan companies must prove they tried to modify the delinquent loans before they can begin foreclosing.
But supporters acknowledge the California Foreclosure Prevention Act won’t stop thousands of foreclosures from eventually happening. There have been more than 365,000 foreclosures in California since early 2007, with many more already scheduled.
This bill is no more likely to work than a bill declaring poverty to be illegal or the sky to be green.
Home prices will bottom when they bottom, unemployment will bottom when it bottoms, and foreclosures will stop when they stop. Those are simple economic facts.
The 90 day extension gives anyone sitting on the edge of walking away as well as those wanting a reduction in principle an incentive to stop paying their mortgage, safe and secure in the fact they cannot be thrown out of their house for another 90 days.
This bill is pure idiocy and will not stop a single foreclosure. Instead, the bill will increase late pays and foreclosures. It’s an exercise of sheer stupidity.
I thank Mike “Mish” Shedlock at http://globaleconomicanalysis.blogspot.com for this post.