Admirable RestraintThe Obama administration has created uncertainty in the economy, which has delayed recovery. Businesses and consumers casting a wary eye at changes in health care laws and the tax code have held tight to their money, reluctant to hire new employees or spend in the marketplace. Unemployment remains high, and economic growth is virtually flat. But the administration should be commended for not injecting itself and further gumming up the works on one important front: home foreclosures. Despite news in recent weeks that many foreclosures have been tainted by sloppy, if not fraudulent, paperwork by lenders, the White House has resisted calls to implement a national moratorium on all foreclosures. It must be tempting for the president in an election season to demagogue the issue, justifying a freeze as a way to support the little guy vs. the big, evil mortgage lenders. Instead, though, it appears the administration recognizes that a moratorium would hurt everybody. That's not to say that lenders are blameless or off the hook. On the contrary, there's growing evidence that they acted, at best, irresponsibly, and at worst, in bad faith. Their employees signed foreclosure documents without carefully reviewing the contents, and in many cases failed to follow the law. It's easy to see why corners were cut — the massive volume of foreclosures after the housing bubble burst has swamped lending offices. As The Washington Post points out, the national home vacancy rate is about 10.9 percent; the historical average is 7.7 percent. The Post notes it will take until mid-2012 to work through this excess inventory, which amounts to about 4 million homes.
What hasn't emerged, though, is any proof that people were wrongfully foreclosed on. Nobody apparently has lost a home that they rightfully owned. That's because they already were in default on the loans when they signed the foreclosure paperwork. Therefore, there is no need for a federal moratorium. In fact, such a move could prove to be disastrous because it would halt the vital process of working through all the foreclosed properties, allowing the real estate markets to bottom out so they can begin rebounding. A freeze would prevent assets from being revalued so they can be resold, further delaying economic recovery. These are painful steps, but the alternative ultimately is worse — an economic malaise dragged out over several years. Japan is Exhibit A of an economic correction badly mismanaged by government intervention in attempts to cushion the fall. After experiencing a real-estate boom in the 1980s, a time when many saw Japan as an economic rival to the United States, the Asian nation saw its bubble burst in the 1990s. The Japanese government tried stimulus spending, bank bailouts and easy money to prop up the economy. (Sound familiar?) Bad debts remained on the books of "zombie firms" — those neither dead nor alive. The result became known as Japan's "lost decade," and the nation still hasn't fully recovered. The paperwork mess already is slowing down foreclosures as lenders try to sort through the confusion. If any individuals believe they have been wronged, they can seek redress in the courts. A federal moratorium on all foreclosures is unnecessary and would create further drag on the economy. Let's hope the Obama administration maintains this admirable restraint. REPRINTED FROM THE PANAMA CITY NEWS HERALD DISTRIBUTED BY CREATORS.COM
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