HUD Secretary Shaun Donovan expressed in an op-ed Sunday that “no one should lose their home as a result of a bank mistake,” but warned a blanket foreclosure moratorium would have unintended consequences.
He said the Obama Administration supports “voluntary moratoria,” and that banks and mortgage lenders must follow the law and fix what is wrong, but added that stopping every foreclosure out there would do more harm than good.
“For instance, in Cleveland, where there are over 18,000 vacant homes, lives Millie Davis who recently earned her Master’s Degree in Urban Planning from Cleveland State University and just bought her first home – one that had fallen into foreclosure and sat abandoned for years,” he wrote in an opinion piece on HuffPost.
“Had a blanket moratorium been in place, that sale would have fallen through — not only deferring her dream of homeownership but leaving neighbors on the block to stand by and watch as their property values continue to plummet.”
During the second quarter, a whopping 24 percent of home sales were in some stage of foreclosure, so imagine how bad sales could have been.
Donovan also noted that a blanket moratorium might cause loan servicers to lose focus on helping those on the brink of foreclosure (providing loan modifications, etc.), thereby causing more distress down the road.
“Banks need to provide more help, more people, more resources to those families facing a crisis long before they ever get to a foreclosure — so more families can keep their homes.”
Last month, bank repossessions surpassed 100,000 for the first time on record.