Bank of America suspended all foreclosure proceedings and sales today. They didn’t say as much, but it’s obvious they were hunkering down to ride out the political storm brewing over robo-signers and fraudulently-notarized affidavits–shockingly, shockingly–discovered by some judges in states that require court supervision of foreclosures.
Allow me to make the obvious observation. This and any other foreclosure moratoriums serve only to delay the arrival of a finally price-resolved residential real estate market. This will put a false floor under the prices of residential real estate, that the market will crash through once the moratorium is lifted.
Cooler heads need to prevail. A fraudulently-notarized affidavit should hardly be excused, but neither should it allow a homeower to live at the taxpayer’s expense for six months or more. And yes, it is the taxpayers that will be ultimately on the hook for the bills of these delinquent homeowers, if instead of making the homeower lose his house, we make the bank lose its mortgage. Then the Treasury department will have to throw its money-generating pixel machines in high gear. Tarp I, we hardly knew ya. Hello Tarp II.