Industry Insiders: Get it Over With, Already
by Tom on January 3, 2009
in Market Musings
Tom here – Paul Jackson has the full story but a few thoughts from it and then some more “after the break.”
The December survey asked about the possible effects of a national foreclosure moratorium, with more than 46.3 percent of respondents suggesting that halting foreclosures would have a negative impact on underwriting criteria.
“A national moratorium on foreclosure will drive up investor’s costs associated with foreclosure and increase loses associated with foregone interest income,” explained Derek Martin, director of decision science at National Asset Direct. “This would increase actualized losses, as well as potential losses which would result in tighter underwriting guidelines and larger down payment requirements.”
Respondents were less certain what such a moratorium would do to interest rates, given the governments aggressive intervention into both primary and secondary mortgage markets to push rates downward. 38 percent suggested a moratorium would have a negative impact on mortgage rates.
Another voiced frustration with U.S. Treasury actions thus far. “The problem is being underestimated and has been from the beginning.”
Industry Insiders: Get it Over With, Already : HousingWire || financial news for the mortgage market.
Tom again – I know that neither of the two comments cited show an overwhelming majority, but let’s look at what they do say:
- Halting foreclosures will tighten lending requirements. Why? Because we don’t know how bad it’s going to be and how much we’re going to lose yet.
- There’s a very real chance that a halt on mortgage foreclosures is going to make mortgage money more expensive. Why? It’s pretty simple, until we get to the point of knowing what we’re dealing with, we can’t accurately assess risk and then we can’t figure out how expensive things need to be.
So, when you read about politicians who want to stop the “big old banks” from foreclosing, remember a couple of things:
- Some of the “big old bank” scenario is justified but a lot of it isn’t.
- Stopping foreclosures can have unintended consequences.
Stay tuned for more.
