The Real Estate Bloggers

Feds Sides With Financial Industry In Foreclosure Mess

Posted: 12 Oct 2010 06:06 AM PDT

While the Obama administration did not sign the misguided banking protection legislation allowing banks to foreclose even when they have failed to keep accurate paperwork, they are having a hard time deciding on what to do about foreclosures as a whole in the economy. At the present time they are sticking with the financial community over the populace calling for a foreclosure moratorium.

The New York Times explains their dilemma:

The administration’s basic logic has not changed since it took office in the depths of the financial crisis: Hitting the financial industry, officials argue in private and in public, hurts the broader economy. A moratorium on foreclosures may provide short-term political satisfaction in an overheated election climate, but the administration fears it will only delay the inevitable and necessary process of forcing many Americans out of homes they cannot afford.

The intramural argument among Democrats also reflects the political divisions between an administration with two years to improve the economy, and members of Congress facing an angry electorate in less than a month.

The White House can focus on the eventual economic benefits of foreclosures. But Senator Harry Reid, the Nevada Democrat battling to salvage re-election in the state with the nation’s highest foreclosure rate, cannot. The result is that Mr. Reid favors a moratorium, and the White House finds itself in an uncomfortable moment of agreement with his Republican opponents.

So what should the White House do? The banks have made a mess of their foreclosure accounting and paperwork and the groundswell by the populace is to halt all foreclosures, yet to do so will but a huge strain on the banking and real estate sectors.

Let me know your opinion in the comments.

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Feds Sides With Financial Industry In Foreclosure Mess