I fail to be heartbroken that millions of Americans bought more home than they could afford and that they are now struggling to stay in it.
Why should I care about people’s bad financial decisions? Why is the decision to buy a home out of one’s financial range deserving of special sympathy? People make bad financial decisions every day. Why should those who didn’t make such bad decisions bail them out?
If you subsidize bad decision-making, you’ll only get more of it.
Here’s a news story about the slow-moving world of foreclosures. Yes, this gives breathing room, yes, this gives a break, to those who made bad financial decisions. But is this good news for America? Is this good news for the economy as a whole? Is it good news for the housing industry?
No! This just means that the free market is working less efficiently. That is the drag on the entire economy and only delays the inevitable price declines and settling out in housing that will be necessary before the market takes off again.
In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books.
“If you were in foreclosure four years ago, you were biting your nails, asking yourself, ‘When is the sheriff going to show up and put me on the street?’ ” said Herb Blecher, an LPS senior vice president. “Now you’re probably not losing any sleep.”
When major banks acknowledged last fall that they had been illegally processing foreclosures by filing false court documents, they said that any pause in repossessions and evictions would be brief. All of the major servicers agreed to institute reforms in their foreclosure procedures. In April, the Office of the Comptroller of the Currency and other regulators gave the banks 60 days to draw up a plan to do so.
But nothing is happening quickly. When the comptroller’s deadline was reached last week, it was extended another month.