Well meaning people are often wrong. The foreclosure process -- essential to the cleansing of consumer debt and the recovery of the housing market -- is very painful for the families that must endure it. Many on the left of the political spectrum are pandering to the masses facing foreclosure and proposing policies that would remove the negative consequence of foreclosure for those who over borrowed. Unfortunately, removing these consequences is the essence of moral hazard: if people don't experience consequences of their foolish actions, they tend to repeat the mistake. John Taylor: Foreclosures Are the Mortal Enemy to Economic Recovery Lori Ann LaRocco -- Monday, 29 Nov 2010 -- (edited for brevity) The foreclosure crisis still divides us into…[READ MORE]

Are you ready to carry your neighbor. Some time ago, I wrote about the problems California HOAs are having with delinquent properties the banks do not foreclose on. The amend-extend-pretend policies of lenders is fraught with unintended consequences. The obvious costs to lenders is lost revenue from squatters who get to stay in their homes without making any payments, but lenders are not the only parties involved who aren't getting paid. Local taxing authorities and Home Owners Associations (HOAs) also are not being paid. The taxes will get paid eventually because property tax obligations survive the foreclosure. Whatever bills the old owners left behind are the responsibility of the new owner. Bills due to HOAs are only paid after mortgage holders are paid in…[READ MORE]

Not long ago I noted, Low Interest Rates Are Not Clearing the Market Inventory. Well, I am not the only one who has noticed. Richard Fisher, President of the Federal Reserve Bank of Dallas, has also noted that low interest rates will not fix the ailing economy, but super low rates will have many deleterious effects not anticipated by others at the Fed. Dallas Fed president: Low interest rates won't spark demand by JACOB GAFFNEY -- Monday, November 8th, 2010, 3:28 pm The environment of exceedingly low interest rates is great for banks, according to Richard Fisher, President of the Federal Reserve Bank of Dallas, but is doing little to help the overall economy get back on track. "Despite their…[READ MORE]

Most of the policy decisions coming out of the Federal Reserve appear as if they are making it up as they go. During 2008 and 2009, some of the emergency lending windows opened at the Fed likely saved the economy from total collapse; however, many of the policy decisions have not been as successful, and the attempt to re-inflate the housing bubble to save bank balance sheets is failing as house prices roll over despite historically low interest rates. Are the Fed's Honchos Simpletons, Or Are They Just Taking Orders? (November 1, 2010) -- Charles Hugh Smith Without exception the Fed's policies are pernicious failures; either they are exceptionally thickheaded, or they are just taking orders. At the risk of…[READ MORE]

Mortgage Mess: Shredding the Dream The foreclosure crisis isn't just about lost documents. It's about trust—and a clash over who gets stuck with $1.1 trillion in losses October 21, 2010 -- Peter Coy, Paul M. Barrett and Chad Terhune In 2002, a Boca Raton (Fla.) accountant named Joseph Lents was accused of securities law violations by the Securities and Exchange Commission. Lents, who was chief executive officer of a now-defunct voice-recognition software company, had sold shares in the publicly traded company without filing the proper forms. Facing a little over $100,000 in fines and fees, and with his assets frozen by the SEC, Lents stopped making payments on his $1.5 million mortgage. The loan servicer, Washington Mutual, tried to foreclose…[READ MORE]