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No Foreclosure for the Holidays?

posted by Adam Levitin

Fannie and Freddie are reportedly enacting a voluntary foreclosure (or really eviction) moratorium for the holidays. Much obliged guv'nor! 

I've got a beef with this foreclosure moratorium. It captures everything that is wrong with how the GSEs and FHFA have handled foreclosures.

First, it moralizes the foreclosure issue. This isn't a moral issue. It's a macroeconomic policy issue and FHFA is being pennywise, but pound foolish in how it handles foreclosures. It makes no more sense to give relief over the holiday season than it does to give relief solely to those homeowners who meet some set of moral criteria (e.g., not speculators). From a macroeconomic impact perspective the only thing that matters are numbers. If we are going to moralize the foreclosure issue, then we need to talk about the lending as well as the defaults; it is very artificial to only dole out relief on some moral grounds without looking at why the relief is needed in the first place. 

Second, I'm not a fan of foreclosure moratoria generally. Foreclosures are not a binary good/bad issue. Instead, some are foolish and others are sensible. Servicers don't do a particularly good job distinguishing between them. That means that foreclosing on no one is a suboptimal solution, just as foreclosing on everyone is. It's frustrating that we are still in a largely binary world 5 years into the foreclosure crisis.  You'd think that servicers would have gotten better at sorting between the situations in which a mod makes no sense and those in which it does. But that would take a type of investment in skilled manpower that many servicers are unwilling to make, especially as that type of manpower will not be a valuable asset for more than a few years and is not locked into the firm.

Finally, how on earth is a holiday moratorium justifiable under the conservatorship? If the FHFA is going to get worked up over variations in state foreclosure timelines and get high and mighty about protecting the taxpayer, then why isn't it cracking the whip here, holidays be damned? Either this is about saving taxpayer dollars or this isn't. I don't see anything in the conservatorship statute authorizing discretionary Christmas presents. (And I'm going to have a lot of trouble swallowing a goodwill/reputational benefits explanation.) FHFA can't pick and choose when it will play Scrouge and when it will play Santa any more than it can pick and choose when to play the economics card and when to play the morality card.

Comments

Given my nom de plume, I feel a bit odd commenting on this post. But comment I shall.

I would say that FHFA is sentimentalizing the foreclosure issue, rather than moralizing it. The former is even worse than the latter.

I was against foreclosure freezes before it was cool:

http://www.creditslips.org/creditslips/2010/10/foreclosure-relief-could-help-economy-and-end-chaos-faced-by-borrowers.html

http://www.creditslips.org/creditslips/2009/02/some-good-news-for-homeowners.html

It is an untargeted approach. Some folks just want to give up the property - and the community at large has an interest in getting that done, rather than having property sit vacant.

Failing to distinguish between those people who want to stay in and possibly save their homes, and those who want to abandon them, creates public health and safety problems.

Medical science has a word for not being able to discern between a real tangible and an imaginary intangible, Schizophrenia. If the law supports the action, so mot it be.

If the law does not support the action, lie, cheat and steal so that it appears that law supports the action. FHA and the GSE's like Santa Claus will never be a judge over mankind, that privilege is reserved to God.

As stated in Chicago Trib/Reuters piece linked in this post, this "doesn't mean the foreclosure process will be put on hold."
Fannie Mae press release more specifically states "Legal and administrative proceedings for evictions may continue".
http://www.fanniemae.com/portal/about-us/media/corporate-news/2012/5893.html

Terry Edwards, Executive Vice President of Credit Portfolio Management at Fannie Mae, quoted in press release has an egregious history with regard to "Legal and administrative proceedings for evictions".

Prior to his trip through the revolving door, Edwards was president and chief executive officer at PHH Mortgage Corp. where he was employed for nearly 30 years.

While at PHH on April 26, 2006, Edwards signed a Unanimous Written Consent of the Board of Directors in Lieu of a Meeting, authorizing robo-signers Tracy Johnson, Daniel C. Schmidt and Mycal Farmer, employees of the notorious LOGS Group, created by foreclosure mill kingpin Gerald M Shapiro, to act as signators for foreclosure documents on behalf of PHH.

This Unanimous Written Consent can readily be found here:
http://www.judiciary.state.nj.us/superior/supp_cert_phh_mortgage.pdf
Page 68 - Exhibit H

Holiday moratoriums are not Christmas presents and it's a waste of time to get worked up over whether they are justifiable because they have already told us that "Legal and administrative proceedings for evictions may continue". We know they WILL continue as robo-signing elves remain busily at work, the beat goes on. Terry Edwards knows this too! So call this what it is, a ploy giving robo-signers time to catch up, a faux moratorium and know that sheriffs will be knocking on or knocking down doors on January 3rd.

Blossom nailed this one - and let's get it straight. This is NOT a *foreclosure* moratorium. This is an EVICTION moratorium.

The quotes from Terry Edwards are absolutely priceless... "We're taking this step in support of families who have faced financial challenges," said Terry Edwards, executive vice president of credit portfolio management at Fannie Mae. "The holidays are a chance to be with loved ones and we want to relieve some stress at this time of year."

In other words, "We've already taken your home but we're not going to throw you out until after the New Year." The only question I have for that scenario is, "Does the asset hit Fannie and/or Freddie's books upon foreclosure or eviction?" Oh wait... According to their own guidelines, they've owned it all along regardless of whether it's in a trust or not.

Steve Dibert has apparently been bouncing Fannie around for awhile now with this. http://www.mfi-miami.com/2012/08/mfi-miami-accuses-fannie-mae-of-illegally-foreclosing-on-michigan-school-teacher/ I may have to call him just to go over this ground one more time before starting to bring his arguments to NH.

What makes this whole scenario that much more laughable, while not even CLOSE to being funny, is that as of 30 seconds ago when I looked there are 25 Fannie *auctions* scheduled for 7 of the 10 NH counties between 12/19 and 12/27 never mind 01/02/13. The earliest FC notification on these went out 11/02. There is no way that anyone can tell me that Fannie didn't know that it was going to postpone auctions 30 days ago. So borrowers have already received notice of the auction which, in my experience, means that they will most likely have already moved out by the auction date. I wonder if they remembered to tell Harmon and Haughey to at least halt evictions...

I guess the Texas Republican Party Platform is right: we are a "Christian nation." Seems like no one explained to Fannie & Freddie that millions of Americans either have no religious affiliation or regard other times of the year as their holiday season. Many Christians celebrate the holiday on January 7. Do they get an extension til then? Can Jews claim their moratorium begins on Dec. 8 at sundown, the start of Hanukah? Perhaps Christmas has become so commercialized that it's wrong to even suggest that Fannie & Freddie are referring to a religious holiday.

I would love to believe that Blossom hasn't perfectly captured our second term cynical reality, which our President so strangly proclaims a naysayers' lie.

...He of the gire and gimble t'was brillig, "they didn't do anything illegal..."

And Shelby is moving to approps. Is that a good thing? Is it a hopeful thing? Or will he effectively compound the tragedy there on behalf of the new Purple?

See the Congressional record this week - They cannot bring themselves to even appove of international ADA ideals on behalf of the American people, or to stand up for protection of our native american women against a shameful epidemic of violence and rape. So why should we expect our electeds to tire of their spree of mere financial looting and pillage against us?

My take on the matter is that it seems Fannie & Freddie were just fishing for brownie points. If a family has been foreclosed on and are awaiting an eviction notice - their holiday is ruined already.

As already noted, evictions are the only halted process. I frankly would have thought that not sending notices of default/foreclosure would have been more of a kind gesture. Seems like they missed the ball yet again.

Simon Campbell - http://www.bankforeclosuressale.com

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