After all of the assistance that the government has given large banks, the least that the firms can do is extend liberal terms to homeowners to support the housing market.
According to The Wall Street Journal, “Some of the nation’s largest mortgage companies are stepping up foreclosures on delinquent homeowners. That will likely lead to more Americans losing their homes just as the Obama administration’s housing-rescue plan gets into gear.”
The banks will argue that the only foreclosures they will push are based on evidence that some homeowners do not have the income to stay in their homes, even with government assistance to make their mortgage payments. That seems like a reasonable position, but it breaks what has been a vague and tacit agreement between federal financial operations including the Fed and the Treasury and the banks they have provided money. The financial firms get capital to shore up weak balance sheets. The banks then turn around and supply some of that money to help loosen consumer and business credit.
The blame for rising foreclosures rests more with the government than with the banks. The banks are only doing what they would normally do, which is handle troubled loans in the manner that benefits them most. The Administration has been slow to get its “homeowner rescue” package into the market, so whatever benefit its intervention might have on housing prices is being pushed closer and closer to the middle of the year. In the meantime, tens of thousands of people will be pushed out of their houses.
Big banks are about to crush housing prices further than they have already been crushed. The government might have prevented some of that, but it hasn’t. And, rising foreclosure will undermine many of the Administration’s plans to improve the economic circumstances of the average citizen.
Douglas A. McIntyre