Turn On The Lights, Watch The Roaches Scatter, Part 16

Unbelievably, there may be a major hitch that that all but inevitable national foreclosure freeze...the Obama administration itself.

The Obama administration does not support a nationwide moratorium on foreclosures at this time, Federal Housing Administration Commissioner David Stevens said Sunday in an e-mail response to questions.

"We believe freezing foreclosures for all banks in all states, whether we have reason to believe them to be in error or not, is simply not the prudent step to take in this fragile housing market," he said.

With approximately one in four homes sold in the second quarter in foreclosure, administration officials worry that a moratorium could have a significant impact on the economic recovery.

"While we understand the eagerness to make sure that no American is foreclosed upon in error, we must be careful not to over-reach and apply a remedy that will make the underlying problem of foreclosures worse," he added. 

I don't think the White House's opposition is going to matter in the least given the massive liability the banks are facing right now, but Wall Street's growing opposition to this will.  Even Yves Smith is pissed off at this one.

So we are back to Wall Street calling the shots, the very same Wall Street that invokes the “give us what we demand or we’ll shoot the economy” demand whenever its pet interests are threatened. Here the securitization industry was colossally irresponsible in its conduct, and has created a mess that will be monstrously difficult to remedy….and we’re supposed to plow onward in business as usual mode?

And notice the false dichotomy: the banks who screwed up yet again (and will need to be recapitalized again, trust me, foreclosure moratorium or not, there is a tsunami of litigation on the horizon that will bury servicers and the major trustees on securitizations) versus “Congressional leaders who are playing politics.” Huh? And it FURTHER, and falsely implies that those evil Congressmen are the reason banks have imposed moratoriums. Erm, it has to do with the fact that filing an improper affidavit is a very serious matter, and the banks have to straighten that out (at a bare minimum, as we stress here repeatedly, the affidavits are merely the presenting problem, not the fundamental failing).

And we further get another lie, that it’s the foreclosure freezes imposed by banks, and the prospect of more at the state level, that might affect REO sales. That’s another Big Lie; the most pressing impediment, and it’s not getting better any time soon, is title insurers withdrawing from foreclosure sales from banks that have admitted to having affidavit problems. Other title insurers are reported to be writing qualified policies on foreclosure sales.

In other words, this is exactly the line the Wall Street banks want the White House to take.  We're right back in the exact situation we were in October 2008:  banks telling the people who make the decisions that if the banks themselves have to fall on their swords for their own malfeasance, the economy is toast, so we have to give them more money now!

The problem is not doing so this time will still wreck the economy, and given the legal liability these banks are facing, what the White House thinks about the foreclosure freeze doesn't matter in the larger scheme of things.