The Obama administration has taken aggressive efforts to attempt to prevent foreclosures. There are numerous programs out there to try to help struggling Americans stay in their homes, the most notable of which is the $75 billion Making Home Affordable Program (HAMP). So you might think the White House would cheer when banks began announcing that they were halting foreclosures due to documentation problems. After all, this could provide more time or reason for homeowners to qualify for modifications. Yet, administration officials are not among the chorus of lawmakers calling for a national foreclosure moratorium.
In fact, on CBS's Face the Nation this week, senior White House advisor David Axelrod made clear the administration does not believe a national moratorium will help. Here's an excerpt from the show's transcript (.pdf), responding to a question about the foreclosure halt asked by Bob Schieffer:
First of all, Bob, it is a serious problem. It's thrown a lot of uncertainty into the housing market that is, you know is already fragile. And it's-- and it's bad for the housing market and it's bad for these institutions which is why they're scrambling--now to-- to go back through and-- and-- and through their documentation for all of this as they should. The President was concerned enough to veto a bill that came to him last Thursday, that would have unintentionally made it perhaps easier to make mistakes. And, so we are concerned. We're working with these institutions. I'm not sure about a national moratorium because there are, in fact, valid foreclosures that-- that-- that probably should go forward. And where the documentation and paperwork is-- is proper, but we are working closely with these institutions to make sure that they expedite the process of going back and reconstructing these and throwing out those that don't work.
Those who argue for a national moratorium say that the entire foreclosure process has been thrown into doubt as most major banks have halted foreclosures due to documentation problems. Yet, here you have Axelrod saying that there's no basis to say that all foreclosures should be temporarily stopped until banks have fixed the problems that exist. Considering the administration's earlier attempts to try to prevent foreclosures, that attitude is a little bit surprising.
But it's important to note that the White House here appears to be taking a moderate approach. As Axelrod says, President Obama vetoed a bill that would have made it easier for banks to get around documentation discrepancies. So he isn't blindly supporting the banks, but he also isn't an unyielding advocate for struggling homeowners. If he were, then he would be calling for a national foreclosure moratorium. There are a few reasons why the administration may have decided to stop short of calling for a complete halt.
Fannie and Freddie
According to a Washington Post article from yesterday, this foreclosure stoppage endangers Fannie Mae and Freddie Mac. It could cause billions of dollars in new losses. Consequently, Fannie and Freddie have warned banks that they had better fix the problem quickly or face penalties.