Calls for a total freeze on U.S. foreclosures ran into opposition from Wall Street and the White House amid predictions that clearing up faulty paperwork and resuming evictions may take as little as two weeks.
A complete halt would be “catastrophic” for the U.S. economy and hurt home sales, said a statement Monday from President Tim Ryan at the Securities Industry and Financial Markets Association, Wall Street’s biggest lobby. A day earlier, David Axelrod, a senior adviser to President Barack Obama, also said a moratorium would damage the housing market.
Bank of America Corp. halted foreclosures in all 50 states last week, while lenders including JPMorgan Chase & Co. and Ally Financial Inc. have stopped evictions in 23 states where courts supervise home seizures. They’re checking allegations that employees used unverified or false data to speed the process. Lawmakers, attorneys general and community groups have called for banks to follow Bank of America’s example.
“It would be catastrophic to impose a system-wide moratorium on all foreclosures and such actions could do damage to the housing market and the economy,” New York-based SIFMA said. “The mortgage market, investors and the health of the economy are all inter-related.”
SIFMA, which represents Wall Street securities firms, banks and asset managers, said a moratorium would “unjustly” create losses for housing market investors, including workers with pensions, retirement accounts or mutual funds, and “further constrain consumer credit and spending” because of uncertainty in the securitization market.
Brian T. Moynihan, chief executive officer at Charlotte, N.C.-based Bank of America, has said the bank wants to check its work, which could take a few weeks. The halt by U.S. lenders to review documents is just a “processing issue” and won’t affect bank profits, according to Thomas Brown, chief executive officer of Second Curve Capital LLC. His New York-based investment firm specializes in financial companies.
