The notes are evidence of debt, so if the public can be convinced the homeowners are the culprit and those still in their jomes are all deadbeats (sure some are but not all)

The systemic risk that is being down played in most media, is the possible downfall of banks if they have to eat the loans and we all know the public is not looking too kindly on them in the USA. So golly gee, whose side is he taking anyway?

It would be fairly safe to say the legalities of hashing this out would cause more economic problems, but changing the law in the banks favour to ‘fix’ this?

~~SHUDDERS ~~

He has not made a single decision at the NY Fed or Treasury which was not wholly in favor of letting the banks off the hook for incompetent and egregious behavior. In fact, the rising compensation at the banks over the past few years has shown that he has been enriching them at a time when a number of them should have been “resolved” less favorably.

@Greycap,

Charlie Rose was fishing for Geithner to support a blanket moratorium. Geithner responded by criticizing the large banks, supporting moratoria at banks that had problems, but not supporting a blanket moratorium.

@Felix,

I think this is Treasury’s point:

Assume a six month moratorium. The houses that have already been abandoned during foreclosure will remain unoccupied six months longer than usual, because the bank can’t sell them until the moratorium is lifted.

Now, you might respond that the occupancy rate will go up on net because the people who stayed in their houses during foreclosure (and everyone who would have been foreclosed on) will stay in their houses. And over the short term, maybe it will. But that’s not correct over the long term, because in six months, they’ll go into foreclosure, and will presumably have average length unoccupancy periods thereafter. Their unoccupancy is just being delayed.

I think that’s Treasury’s model. Now, there are a couple assumptions you can pick at here. The most notable is that it assumes the paperwork problems, while pervasive, can be overcome to the satisfaction of judges that will be very skeptical.

Regarding the second paragraph: was “a blanket moratorium” on all mortgage foreclosures, regardless of mortgage holder, actually proposed? And if so, why? Isn’t the conveyance problem with securitizations? How would a moratorium on foreclosures associated with RMBS threaten the safety and soundness of “smaller community banks”? And is it “pristine borrowers” that are in short supply, or pristine lenders?

(1) There are houses that have been foreclosed and are on the market.

(2) There are other houses where the owner is behind on payments, and will not be the owner at some point in the future–assuming the real owner can claim possession of (clear title to) the house.

(2b) Those houses will go on “the market” after they are foreclosed, because the bank doesn’t want to own them either.

(2c) Some section of those houses in (2b) are already vacant. All of the houses in (2a) are vacant. If the foreclosures proceed, all of the hosues in (2b) will be vacant. If they do not, there is a chance that some of the (2a) houses will be sold to people wanting to own them, and therefore become occupied.

Having once tried to buy an in-foreclosure-process house where my realtor was on both sides of the transaction–and having been unsuccessful then, despite title not being an issue–I believe I can safely say that Tim Geithner is, as usual, lying. (That he is doing so in such a way that people try to give him the benefit of the doubt is why, pace Brad DeLong, he generally wins political arguments.)

The issue w/REO homes not moving back into the market b/c of doubts about the title seems a more valid concern, but one not directly tied to the foreclosure moratorium, so much as to past errors in the way the foreclosures were conducted. So it’s a little hard to see why continuing the foreclosures before the flaws in the foreclosure process have been straightened out is going to make that problem any easier to fix.

Yes, I agree it is a stretch and the explanation doesn’t make too much of a sense either, but this is the best I can come up with trying to give any sort of context to what Geithner said.

If would-be buyers and industry participants are worried about clarity of title (as a result of alleged improper actions in foreclosures), then the banks won’t be able to quickly sell REO property, and that property probably IS lying vacant.

A foreclosure moratorium signals problems with foreclosures, which jams up the post-foreclosure sales process.

As Yves Smith has shown, just wait until the public realizes that foreclosure problems are just one symptom of the foundational, and perhaps unfixable, problems in the entire RMBS securitization process.