The editors of the Washington Post give President Obama credit for resisting, so far at least, calls to order a national moratorium on foreclosures in response to problems with the paperwork involved in the foreclosure process. The Post’s editors are right to commend Obama.
To be sure, Obama has a political interest in eschewing a moratorium; in fact he has a double interest in doing so. First, a lengthy halt to foreclosures would postpone the bottoming out, and ultimate stabilization, of the housing market. This, in turn, would impede overall economic growth.
Second, the Obama administration was warned of the widespread documentation problems associated with foreclosures, but did nothing in response. Thus, a moratorium would be a double flow to the White House – Obama would suffer by virtue of both the general adverse economic consequences and his administration’s specific culpability in neglecting the problem that produced them.
Even so, it must be tempting for Obama to demagogue the issue, especially with an election right around the corner. It wouldn’t be the first time that Democrats have taken dramatic measures, in a response to a problem they helped create, for the purpose of winning votes in the short-term and extending government power.
If the documentation problems were causing large numbers of people to lose homes they otherwise would be entitled to keep, a national moratorium might be justified. But, as the Post’s editors point out, there is no evidence that this is the case. Nor would one expect it to be. The “robo-signed” affidavits at issue were, the Post’s words, part of a technical review of documents, not the actual determination of the borrower’s delinquency. Thus, by the time of the robo-signings, default had been well established. The error, or fraud if you prefer, was harmless in an important sense.
Under these circumstances, a federally imposed moratorium makes no sense.
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