Foreclosure Freeze: Good or Bad Idea?

By: Liam Martin Email
By: Liam Martin Email

LANSING -- It's an all too common site.

Foreclosure signs.

More than 100,000 Michiganders battled foreclosure in 2009, and now a movement is afoot to put a plug in the hole -- Lansing Mayor and Democratic gubernatorial candidate Virg Bernero, along with Gov. Granholm, are calling for an all-out moratorium on foreclosures.

Bank of America's decision to do just that has some wondering -- should the rest of our lenders do the same?

"It's an absolutely idiotic idea," says Patrick Anderson, founder of the Anderson Economic Group.

He says a freeze could buckle an already fragile economy.

"It wouldn't just tighten credit, it would eliminate credit," Anderson says. "When you say, 'You don't have to pay your bills,' the first thing that happens is, whoever's selling the product stops selling it."

Even worse, opponents say, freezing foreclosures could further hamstring homeowners who simply can't make their payments.

But proponents of the freeze say it's not about bullying the banks or keeping delinquent homeowners in their houses. A moratorium would be intended to ensure the banks have a proper and fair process before foreclosing on a homeowner.

"Servicers make up their own guidelines," says Tami Farnum, a foreclosure mediate with Franklin Street Housing in Lansing.

She says lenders like Bank of America often foreclose on folks who qualify for loan modification simply because they didn't properly review their paperwork.

"I have had a couple in the past month that went to sheriffs sale -- and they were Bank of America -- that shouldn't have had they had a good negotiator looking at the file," she says.

A little time to vet that process, Farnum argues, is all the struggling homeowners are asking for.


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