CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press The Washington Post Explains How Foreclosure Moratorium Hurts Homeowners

The Washington Post Explains How Foreclosure Moratorium Hurts Homeowners

Thursday, 21 October 2010 07:32

No, unfortunately that is not a joke. The Washington Post devoted a major article to explaining to readers how a foreclosure moratorium is actually bad for homeowners. The article explains that for government workers with security clearance, the ambiguous debt status of a mortgage facing foreclosure may raise issues, since being behind in one's debts can be grounds for revoking a security clearance. (The logic is that if you can't manage your finances you might be susceptible to blackmail.)

There are two serious problems with the Post's piece. First, it is unlikely that someone stands in a better position with their security clearance after their house has been foreclosed than before. There may be some uncertainty while the process is in limbo, but the uncertainty is better than having the foreclosure actually take place.

Second, it is not true as the Post asserts that:

"Foreclosure delays started when Ally Financial, formerly GMAC, suspended evictions last month after concerns arose about flaws in court documents used to seize homes."

Actually, the flood of defaults has created a huge backlog as banks try to catch up with the huge number of people who are behind in their mortgages and also in many cases consider loan modifications. In other words, it is not new that many homeowners who are behind in their mortgages would find themselves in an uncertain status on foreclosure. So, there really is no story here.



Comments (9)Add Comment
blame the victim
written by frankenduf, October 21, 2010 8:04
how cynical- god forbid the media highlight the legal thing to do- prosecute those who committed mortgage fraud (either on the front or, as now, the back end), and cease and desist on the kangaroo courts erected for expediency rather than law enforcement- or the ethical thing to do- show compassion for the suffering of the middle class, rather than defernce to the arrogance of the finance industry
written by izzatzo, October 21, 2010 8:11
Imagine that Mr Whose Your Nanny, everytime the government interferes in one place, it just pops out in another as one more instance of failed regulation.

For example, the reason there's so many private jets loaded with ultra rich passengers with security clearances, is because they were placed on the no-fly list for commercial airliners as a security risk for being bailed out.

It's true. Wiretapping records showed thousands of conversations between terrorists and the ultra rich during their financial vulnerability as bribes and blackmail were used to compromise the huge privatized homeland security infrastructure.

However, just before the records were published, somehow they got destroyed with a new software program called Teabagger Permanent Swipe and Clean for Socialist Hard Drives.
Wouldn't it be bad for young would be home owners
written by floccina, October 21, 2010 9:18
Wouldn't it be bad for young would be home owners? Lower prices would be bad for some current home owner but overall cheaper is better.
Finally some leverage for working people
written by Brighton, October 21, 2010 9:36
Now that so many home loans are effectively unsecured, homeowners can renegotiate on better terms. No excuses for the bankers and lawyers engaged in this scheme. Mortgage backed securities should be illegal. http://brighton-towne.blogspot...acked.html
Government secrecy
written by Rich2506, October 21, 2010 11:22
I remember reading a number of what were considered radical. left-wing books in the mid-80s and the theme of a few of them was that the government keeps way too many secrets. One especially serious problem was that open information is often more meaningful than what a secretive agency can provide using covert methods. We saw this especially in the run-up to the Iraq War, with Senators and Congresspeople saying "You don't understand, we've got all these highly secret sources that tell us something different from what all your open sources plainly indicate."
The WaPo obviously believes that going through someone's confidential files is more illuminating than simply observing that someone just suffered a foreclosure on his house.
I've often felt that having a competition between an open-source briefer and a secret-source briefer might be more useful to legislators than a single, obviously secret-source, briefer trying to cover and account for everything they need to know.
written by Matt, October 21, 2010 11:44
floccina has it right.

But the WaPo certainly doesn't care about them! They haven't accumulated sufficient assets to be worthy of neoliberal consideration.
Got the facts; don't be the one you often villify
written by Jack, October 21, 2010 12:42
You said: "First, it is unlikely that someone stands in a better position with their security clearance after their house has been foreclosed than before."

Have you gone through a security clearance? Do you know the specific condition of one's employment esp. with the Federal gov't?

You would have to explain and explain to local management in that the foreclosure is wrong. Then local will pass on to regional and then to DC. You hope that every level of management will accept your exaplanations.

So, don't simply dismiss so reflexively.
written by Eric, October 23, 2010 8:48
Having credit available to purchase homes is good for the society. This credit is going to be much more available as secured credit than as unsecured credit. The availability of this credit will be increased by a reliable and reasonably quick process to recover the secured property in the event of default. There is no excuse for committing frauds on the courts to effect a foreclosure, but the idea that foreclosure is a net benefit to homeowning is not a stretch at all - in fact, it should be pretty obvious to anyone who thinks about it for 5 minutes.
Security Clearance Scam
written by FoonTheElder, October 25, 2010 11:48
The security clearance issue is another scam from top to bottom. In my experience, the biggest fraudsters who are most likely to sell out their country, are always the ones who act like they're multi-millionaires and appear to have good credit, at least for the moment.

The armed forces are now having to deal with soldiers who they won't let go overseas because of security clearance, as they have too many outstanding payday loans or homes in foreclosure.

Does being in debt in today's U.S. really have anything to do with security issues?

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.


Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.