According to the Washington Post, a breakdown in the nation’s foreclosure process threatens to create billions of dollars in losses for federally controlled mortgage finance companies Fannie Mae and Freddie Mac, highlighting how improper actions by banks could impose new costs on taxpayers, said government officials and industry sources.
According to the Wall Street Journal, they are not aware of a single case so far of a substantive error. Out of tens of thousands of potentially affected borrowers, they’re still waiting for the first victim claiming that he was current on his mortgage when the bank seized the home. Even if such victims exist, the proper policy is to make them whole, not to let 100,000 other people keep homes for which they haven’t paid.
In their zeal to find and prosecute the great bank defendant, state Attorneys General aren’t waiting to see if anyone within their borders was actually harmed. In a civil suit, Ohio’s Attorney General Richard Cordray has even charged an Ally employee with fraud for signing the documents without reading them. In a Journal interview, Mr. Cordray compared the employee to Nazis at Nuremberg who claimed they were just following orders.
A lengthy moratorium on foreclosures may provide temporary help to the frail housing market. But it will delay the day of reckoning and ultimately threatens to damage many more homeowners who are current on their loans.