The administration's foreclosure policy -- for now
Earlier today, HUD Secretary Shaun Donovan joined Treasury's Michael Barr to brief reporters on the administration's response to the foreclosure mess. And the answer, basically, was that "it's under review." A variety of agencies overseeing a variety of sectors related to the housing market are participating in a "comprehensive" review of the matter that should finish up in nine weeks. That gives the administration time to let this mess sort itself out and, if it doesn't, time to figure out how to insert themselves more directly.
But they'd clearly prefer not to. "The moratorium, which is still in place for Bank of America in a majority of states, is their decision, their business decision, and it is a decision every servicer is making independently. What we need to be clear about is that we work with state attorney generals to make sure those processes are done correctly." In other words, the administration's policy, as of now, is that the continuation of the foreclosures is up to the banks. The administration's role is to make sure those foreclosures are going by the book. It is not, as some hoped, to halt all foreclosures, or use the uncertainty to reform the underlying process.
"We require our servicers, early on in the process, to contact borrowers who are delinquent, offer them a specific set of options -- like a modification or a payment plan -- that would allow them to stay in their home and minimize losses to the taxpayer," said Donovan. And he came back to that again and again. Some servicers, he argued, simply aren't holding up their end of the bargain, and that's when the government has to get involved.
But whether the servicers are doing their due diligence in offering homeowners facing foreclosure help is a bit different than whether the contracts on which those foreclosures are based have legal authority, or whether investors will be able to force banks to buy back so many of them that the system's solvency will once again come under threat. And on those issues, Donovan largely reserved judgment. "It's under review," he said.
Photo credit: Susan Walsh/AP
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