A Grinch’s View of the Foreclosure Halt

I hate to seem like a grinch. It’s certainly good news that Fannie Mae and Freddie Mac are halting foreclosures for the holiday season. No one wants to see families out on the street at Christmastime, or children’s toys piled on the sidewalk. The government especially doesn’t want to see that, because the images would deal another blow to consumer confidence, and remind people of the Great Depression. So there were obviously good reasons for the freeze, even beyond keeping borrowers in their homes a bit longer.

The idea is to give lenders and servicers more time to streamline mass loan modifications, a new goal of Fannie and Freddie. If that works out, the freeze will have made sense. But since investors in mortgage-backed securities keep saying no to loan modifications, it’s hard to say for sure anything will be better by the time the freeze ends.

At Housing Wire, they’ve got other concerns as well:

The decision to halt foreclosure also isn’t silencing a growing number of critics that say they’re angry at all of the resources and attention being given to troubled borrowers. At HW in the past few days, we’ve been buried under feedback from lenders and servicers — and even employees at both GSEs, too — that have largely expressed frustration at what they see as a bailout of irresponsible borrowers, at the expense of responsible ones.

But it’s not just industry insiders asking questions. The San Francisco Chronicle’s Kathleen Pender last week went ahead and asked the question that’s likely on everyone borrower’s mind that hears about the programs being offered to troubled borrowers: Are you an idiot to keep paying your mortgage?

Her conclusion: for borrowers with little equity in their homes, “it’s getting harder to answer that question, especially when our government keeps giving people who owe more than their homes are worth so many reasons not to pay.”

No matter what Fannie and Freddie do, someone’s going to be unhappy. Fighting over whether borrowers deserve help, it seems, never takes a holiday.