All 50 attorneys general have called for a freeze and an investigation into lenders’ practices. Their concern is that the full accountability of the banking industry, which, after all, was bailed out by the taxpayers, is at stake. They are also worried that without a moratorium, lenders will rush to get foreclosures approved before the problems are fully investigated and resolved. Further, homeowners who might have been able to modify their loans or have their loan principal reduced may be evicted if a freeze is not in place.
The Hesitancy to Suspend Foreclosures
However, many people, including the Obama administration, are hesitant to call for a nationwide moratorium. They argue that the freeze would not only shake investor confidence and delay the housing recovery, but also drive home prices down even further. Potential homebuyers might also postpone plans to buy real estate until the crisis passes. Also, foreclosures accounted for over $40 billion in home sales just last quarter, and banks would be forced to retain these non-performing assets on the books for an indefinite period.
With 6.2 million homes already foreclosed and another 3.5 million due to foreclose by 2012, some have called upon Congress to act. Advocates are urging the federal government to ease the guidelines by which distressed homeowners can refinance their loans, or change the bankruptcy laws so that owners can turn to the courts for a loan modification if banks or lenders refuse or show reluctance.
Everyone agrees, however, that the foreclosures crisis and housing market needs plenty of TLC before it’s back to normal. Some new thinking on this issue may be necessary for the economy and housing market to move forward.
If you are facing foreclosure or have questions, it’s important to speak with an attorney. A knowledgeable attorney can identify available solutions and help you stay in your home.