Turn On The Lights, Watch The Roaches Scatter, Part 15

The Washington Post this morning takes up the "growing momentum" for a national moratorium on foreclosure proceedings in today's signal that the foreclosure nightmare is coming to a head.

Senior Obama administration officials said Friday that a nationwide moratorium on foreclosure sales may be inevitable, despite their grave reservations about the impact a broad freeze would have on the nation's housing market and economic recovery.

Their remarks were made as pressure for a nationwide moratorium mounted Friday when Bank of America, the nation's largest bank, halted evictions in all 50 states. Senate Majority Leader Harry M. Reid (D-Nev.), who is locked in a tight reelection campaign, called on other major lenders to follow suit. 

So what would that entail?

A freeze would also strike at the financial sector, just two years after it suffered one of the worst crises in its history. One government official who has been in discussions with several big financial firms said the banks are bracing themselves for a wave of lawsuits from homeowners who are fighting to keep their homes and from investors who had bought mortgage loans on Wall Street. On Friday, while the Dow Jones industrial average crossed 11,000, most major bank stocks fell. 

Little hard to feel sorry for them then they did this to themselves. 

In addition to a national moratorium, some lawmakers are discussing reviving a bill that would give bankruptcy judges the power to modify loans and reduce principal to market value. The bill passed in the House but did not make it through the Senate.

As the House Financial Services Committee convened a foreclosure-fraud working group to begin discussing ideas for other legislative remedies, the banking industry began to fight back against the notion that the paperwork problem was more than a technicality.

The Mortgage Bankers of America and the Financial Services Roundtable circulated a letter Friday on Capitol Hill to "set the record straight." It said that banks are reviewing their foreclosure paperwork but that in nearly all cases, the foreclosures are justified. 

Could it be the return of cramdown?  With this disaster breaking just months after the new Wall Street regs have gone into law and this all happening around Election Day, it's going to be extremely difficult for the mortgage banks to just snap their fingers and make this go away.

"Calls for a blanket national moratorium on all foreclosures are a bad idea and would cause significant harm to communities at risk, the unstable housing market and the fragile economy," the industry letter said.

Suspending foreclosures could end up forcing banks, which act as service companies for the loans, to spend billions of dollars to compensate investors who own the pools of mortgages they manage. And it could add to the losses at Fannie Mae and Freddie Mac, the two government-owned mortgage financiers. 

And not dredging the loan pool of these bad mortgages will create even larger losses for America.  Sorry banksters, you're in deep feces now.  The jig's up.  That moratorium is coming, and so are the lawsuits.

Meanwhile, Mike at Rortybomb has an excellent article on how the three-card mortgage monte worked.