If our readers understand the title problem correctly, and I have no reason to think otherwise, foreclosures will probably grind to a halt for a while. Maybe a long while. It seems to depend on whether Congress can start writing ex post facto laws that apply to property rights. Maybe they can (it seems like they just tried), but that is a pretty central component of our whole democratic experiment. Imagine a Kelo decision that hoses two thirds of Americans who own a house. Or their lenders! Someone will pay for Goldman’s screwup, and few outside the head injury recovery ward expect it to be Goldman.
The trick is that we do kind of need the foreclosure process. If the bank can’t reclaim failing loans then borrowers don’t have a very strong counterincentive to stop paying their mortgage. Not everyone will gamble right away that the banks won’t come back with goons and padlocks, but a lot of people will. Money isn’t exactly falling out of trees right now.
So. If a foreclosure moratorium has to happen, then the number of people not paying their mortgage has to go up. Maybe way up, depending on how indefinite this moratorium looks.
Think I might invest in hand tools and non-perishable food.