There's a MUST READ article at American Progress that compares the current foreclosure crisis to an outbreak of smallpox in the early part of the 20th Century and discusses how a small town was quarantined and mandated to be vaccinated so that the epidemic would not spread to other towns.
The article suggests that we take similar measures to contain the foreclosure crisis by taking radical steps to contain the foreclosure crisis.
The article says:
Over 1 in 10 Americans are in mortgage default. It is time to re-evaluate how we think of the situation. By any reasonable measure, we confront a spreading foreclosure epidemic that is eating away at the core of the nation's economic health. However well-intentioned, private and governmental efforts to date have not contained the damage. In the early stages of a public health crisis, voluntary treatment of the ill also fails to stop the spread of disease. What makes certain epidemics so devastating is that normal delivery systems for patient treatment are overwhelmed by the sheer number of cases all happening virtually at once.
Isn't this what we're seeing now? Many mortgage companies offering to modify toxic mortgages often are unable to handle the large volume of homeowners seeking help as they try to avoid foreclosure . Not just that, there is an actual BACKLOG in processing foreclosures so that even after homeowners are clearly in default the foreclosures are taking longer than normal to complete. This is an overwhelmed system that has been breaking down.
The article continues:
Moreover, epidemics often infect health workers themselves, further weakening the normal recovery systems. And when rising illness rates and falling resources combine, the health care system is further left unable to help other ill patients, who themselves then get sicker than they might in normal times.
This spread of "infection" has caused bankruptcy for many mortgage companies and has necessitated the need for bailouts of some of our biggest and most powerful financial companies. Also, the foreclosure epidemic is infecting the tax base causing us to cut back on critical infrastructure such as schools and law enforcement.
The author of the article suggests:
- A foreclosure moratorium.
- That we revoke REMIC (Real Estate Mortgage Investment Conduit) status for residential mortgages.
- Mortgage loan modification in bankruptcy
These solutions could provide some powerful remedies for the foreclosure crisis; but do our legislators have the guts to implement them?