Massachusetts Governor Puts Moratorium on Foreclosures
It looks like the governor of Massachusetts is going to put a moratorium on the ability for banks and lending institutions to foreclose on homes in Massachusetts for at least 2 months. While I appreciate his populist notions in an abstract way, Deval Patrick and Massachusetts is going to suffer from the law of unitended consequences for his interference in the free market.
Lenders in the state are already looking at high priced homes that are not appreciating. Now they are looking at a hostile government that will be interfering with their ability to collect? To me that looks like a recipe for disaster as the better companies will determine that the enviroment of Massachusetts is not a place they will want to do business and pull out.
Like the insurance companies, mortgage companies are not forced to do business in a state. And if that state makes borrowing so onerous it does not make sense to do business there. You could see a liquidity crisis that would make the subprime meltdown seem like nothing if lenders determine that Massachusetts is a hostile enviroment and borrowers would see higher rates that the nation to subsidize the governments actions.
Patrick ordered state banking regulators to seek delays of up to two months in foreclosure proceedings against homeowners who have filed complaints with the Division of Banks.
The governor’s move should halt the foreclosure clock now ticking for thousands of Bay State homeowners, said national housing activist Bruce Marks, head of the Neighborhood Assistance Corp. of America.
Marks predicted that as many as 1,000 struggling homeowners working with his organization alone would soon be filing complaints with state regulators. There were roughly 20,000 foreclosure filings in the state last year amid an explosion in high-risk – and high interest rate – subprime mortgages.
“It is effectively a moratorium on foreclosures in Massachusetts,” said Marks, whose Jamaica Plain-based nonprofit has a nationwide network of offices. “It is a very big deal. We will bring the Massachusetts standard nationwide.” via BostonHerald.com.
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Comment by Toby & Sadie on 1 May 2007:
This is a very difficult topic to address. From a political stand-point it is “quick-win” but in the long term this could really hurt mortgage options for Mass. residents.
I think the key is how the government helps the banks. Are they going to provide tax breaks or incentives for them to go along with the government on this moritorium. Or is this just a “stick the dealer” situation, which will likely cause a major fall-out with business in the area.
Comment by Tom on 1 May 2007:
For a new governor this is an auspicious start to his relationships with the business community.
Comment by Robotron on 4 May 2007:
It’s just another 2 free months of rent for these homeowners.
Pingback by Lenders Respond To Massachusetts Governor On Foreclosure Delay — The Real Estate Bloggers on 24 June 2007:
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Comment by TSmith on 2 July 2007:
I work for http://www.CurrentForeclosures.com and we have been seeing a huge increase of foreclosures across the nation because of abusive subprime lending and ARM loans….however, I do not think that allowing homeowners who are struggling to suspend their payments for 2 months is the answer. I agree with Robotron, in that it is just anther 2 free months rent for these homeowners, and even in the unlikely event that it allows them to save the whole months mortgage payment to then help pay for the rest of their loan (like they will really save it-they have other needs that they have to spend it on), this money won’t last forever. Their mortgage payment will still stay the same (if not rise!), and they are still unable to afford it. Foreclosure is not a matter of being short for 1 month, or even 2. It is a matter of not being able to afford the mortgage period.
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Comment by JL on 8 July 2008:
I think this is a great idea! BUT:
Not if you don’t do anything with the 2 months, like arrange 30yr fixed for those who merely need time to do it; to separate the savable from the damned,or at least something. If its just going give a 2 month break hoping that demand and prices will rise to give this crowd some liquidity, I have a bridge you might like to buy. All your’re doing is making the rat moving through the snake get bigger, and an uglier mess when it comes out the other end.
Pingback by Government Intervention Just Postpones Pain For Foreclosures : The Real Estate Bloggers on 31 October 2008:
[...] talked about this before when Deval Patrick, governor of Massachusetts stopped foreclosures for 90 days. Well the results are in, and sure foreclosures dropped in the 90 day window. But look what [...]