Sunday, October 24, 2010;
The suggestion that a foreclosure moratorium would slow the housing recovery ["How not to help homeowners," editorial, Oct. 18] ignored the mangled and dysfunctional state of the "foreclosure market." Widespread securitization has given loan servicers incentives to avoid reasonable mortgage modifications, including much-needed principal reductions.
Foreclosures too often fail to answer the question, "Why is the bank willing to throw me out of my house, to sell it to someone else who'll pay less than I'm willing and able to pay right now?" Too often, foreclosure harms the owners of the mortgages, but the incentives are such that the servicers just grind them out.
A national foreclosure moratorium would undoubtedly force the big banks, the servicers and the securitized mortgage holders to reevaluate their foreclosure and modification practices and clean up the bureaucratic nightmare they now run. Avoiding foreclosures by reducing mortgage principal to reasonable levels will help the housing market find its true level more efficiently and minimize the "value crash" and collateral damage that foreclosure causes.
Sheldon Whitehouse, Washington
The writer, a Democrat, represents Rhode Island in the Senate.