Florida Governor Looks at Foreclosure Moratorium

Looking to follow in the footsteps of California governor Arnold Schwarzenegger, who has proposed a 90-day foreclosure moratorium in the state as a way to prevent foreclosures, Florida governor Charlie Crist suggested to reporters Monday afternoon that his office was looking at a similar proposal. Both California and Florida have been among the two hardest-hit states during the nation’s housing correction, and legislators in both states have been under increasing pressure from consumer groups to halt foreclosures in an effort to find a solution for troubled borrowers. “We’ve been talking about that for several days — even longer, actually,” Crist told reporters, according to a report in the Fort Myers News-Press. “I think it would be a good thing to be able to do.” Crist also suggested that he wants to implement a moratorium in a way that “is not harmful” to the banking industry. “[W]e want them to continue to succeed, to continue to lend money, but we want to stop the foreclosures — especially during the holidays,” he was quoted as saying. At this point, implementing a foreclosure moratorium by state-level lawmakers — especially during the holidays — may not mean as much in real terms relative to the political currency that could be gained by doing so. For one thing, most local municipalities and/or lenders themselves have had long-standing “holiday freeze” policies in place regarding things like foreclosure sales and eviction lockouts during the holiday period. For another, nearly every major lender has put some form of halt to foreclosures during the holiday period anyway. Both Fannie Mae (FNM) and Freddie Mac (FRE) — which own or guarantee roughly half of all mortgages in the U.S. — have already put the brakes on foreclosure sales and evictions until Jan. 9 of next year, announcing the policy late last week. New England-based Webster Financial Corp. (WBS) also said on Nov. 13 that it would halt foreclosures for 90 days. Even larger lenders, including Citigroup Inc. (C), Bank of America Corp. (BAC), and JP Morgan Chase & Co. (JPM) have said in recent weeks they will halt foreclosures on certain borrowers while they look to restructure loans. The question of course, is whether such halts to the foreclosure process really help anyone, or if they merely drive up the costs of a foreclosure for investors, making the cost of credit higher for all borrowers. (No proposed foreclosure freeze has yet, for example, involved a local city agreeing to forego property tax revenue or offer assistance in property maintenance costs.) Underscoring how local legislation enacting what is essentially an involuntary moratorium on foreclosure activity tends to only temporarily stall foreclosures, initial foreclosure filings in Massachusetts soared 465 percent between August to September after being much lower than normal in June, July and August. That temporary lull happened after a new law took effect in May requiring lenders to give homeowners a 90-day right to cure notice before initiating foreclosure. Which means public officials can continue to say they want to do “what’s right for lenders and borrowers” on one hand — but there is little evidence thus far to suggest that halting foreclosures does anything more than kick the can of borrower defaults further down the road, and raise the costs of foreclosure further, on the other. Write to Paul Jackson at [email protected].