Freddie Mac COO Says Foreclosures Must Continue

Freddie Mac’s COO Bruce Witherell wrote a now much talked about blog post on Monday arguing that legitimate foreclosures should be going forward, continuing the government’s position that has been very pro-market recovery. As I’ve argued before (most recently at NRO a few weeks ago), stopping all foreclosures would just further aggravate the shadow inventory, drag out the recovery process, and favors sellers over buyers on a purely arbitrary basis. Witherell takes a similar position:

Foreclosed homes make up 25 percent of all home sales today, and the nation’s supply of foreclosed properties is likely to remain high in the months ahead given the current pace of the economic recovery. This inventory needs to move through the system before we can begin to see a sustainable housing recovery.

He then goes further to make the point that while the process needs to be fixed, documentation problems don’t remove the responsibility of homeowners to pay for their mortgages:

As an industry, we must move aggressively to fix what is broken in the foreclosure process. We must safeguard borrowers’ rights by ensuring that servicers follow the law and avoid shortcuts. But we should not prevent legitimate foreclosures from going forward across the board, because the underlying rationale for foreclosing — a borrower falling irreparably behind on mortgage payments — is unlikely to change even when documentation problems are resolved.

This is nearly the exact point I made earlier this month (also at NRO), and it’s a very important one that should be taken into consideration by everyone who wants a blanket foreclosure moratorium:

If banks don’t have the proper paperwork, they shouldn’t move forward with the foreclosure process — even though this would hurt the banks and the broader economy. However, if they do have the paperwork, then the foreclosures should go forward. Banks need to get this right, but that doesn’t mean that foreclosure-gate problems should halt the whole machine in the meantime.

See the whole Freddie Mac blog post here.

Anthony Randazzo

Anthony Randazzo is director of economic research for Reason Foundation, a nonprofit think tank advancing free minds and free markets. His research portfolio is regularly evolving, and he maintains a wide interest in economic policy at both a domestic and international level.

Randazzo is also managing director of the Pension Integrity Project, which provides technical assistance to public sector retirement system stakeholders who are seeking to prevent pension plan insolvency. His research focus on the national public sector pension crisis has a dual focus of identifying the systemic factors that cause public officials to underfund pension obligations as well as studying the processes by which meaningful pension reform can be accomplished. Within the Project he leads the analytics team that develops independent, third party actuarial analysis to stakeholders considering changes to public sector retirement systems.

In addition, Randazzo writes about the moral foundations of economic theory, and is currently developing research on the ways that the moral intuitions of economists influence their substantive findings on topics like income inequality, immigration, or labor policy.

Randazzo's work has been featured in The Wall Street Journal, Forbes, Barron's, Bloomberg View, The Washington Times, The Detroit News, Chicago Sun-Times, Orange-County Register, RealClearMarkets, Reason magazine and various other online and print publications.

During his tenure at Reason he has published substantive research on housing finance, financial services regulation, and various other aspects of economic policy at the federal level. And he has written regularly on labor economics, tax policy, privatization, and Turkish-U.S. political and economic issues.

Randazzo has also testified before numerous state and local legislative bodies on pension policy matters, as well as before the House Financial Services Committee on topics related to housing policy and government-sponsored enterprises.

He holds a multidisciplinary M.A. in behavioral political economy from New York University.

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