Friday, April 13, 2007

Foreclosure Moratorium: See "Details, Devil In"

by Tanta on 4/13/2007 07:10:00 AM

From the Philadelphia Business Journal, we get "N.J. legislator wants freeze on subprime-related foreclosures":

A New Jersey lawmaker called upon the state's attorney general on Wednesday to impose a moratorium on subprime mortgage loan foreclosures, to give the state time to investigate and address problems.

The moratorium, requested by Assembly Deputy Speaker Neil M. Cohen in a letter to Attorney General Stuart Rabner, would bar subprime lending firms from initiating new foreclosures, pursuing pending foreclosures and evicting homeowners for up to six months.

I realize that a subject involving local politics and homeowners does, in the wonderful world of journalism, demand that no useful questions be asked prior to publication, but on the off chance that some reporter out there cares to follow up on this scoop . . . could you ask next time whether this is also a moratorium on charging interest on delinquent loans? Does it require the lender to keep the asset in accrual status--even though normal accounting rules would suggest otherwise--because the collectability of the loan is now a matter of politics? If the moratorium expires without new magical escape routes being invented, and the delinquent borrower now owes six months worth of additional interest on the debt, effectively wiping out whatever tiny slice of equity that borrower might have had, will the taxpayers of New Jersey happily pay that? Will the lender eat it? The mortgage insurer? The HELOC holder? Or will the borrower just be screwed later rather than sooner? At least one inquiring mind would like to know.

I'd also kind of like to know what the state of New Jersey (or anyone else, frankly) thinks it can figure out in six months that hasn't become painfully obvious by now, but let's consider that an extra-credit question.