A foreclosure sign hangs in front of a home for sale.
A foreclosure sign hangs in front of a home for sale. - 
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Tess Vigeland: Adrienne Hill mentioned B of A's decision to suspend some foreclosures. Three other big banks have done so in 23 states, and judges all over the country are starting to take a second look at foreclosure paperwork.

For the bigger picture we're joined by Nic Retsinas, director of Harvard's Joint Center for Housing Studies. Welcome back to the show.

Nic Retsinas: Nice to be back with you.

VIGELAND: So here we are, two years, three, into the housing crisis. And 50,000 people show up at a convention center because they're so desperate for help with their mortgages. Why isn't this getting done in other ways? Is it because the government has been using carrots instead of sticks?

RETSINAS: Well from the beginning, the government has encouraged -- first as a cheerleader at the end of the Bush administration, and then with the Obama administration -- a number of incentives using the bully pulpit. It didn't require participation, but it tried to encourage servicers and investors to modify the loans. As they were doing that, however, the marketplace changed. So instead of problems with mortgages, people had problems with their jobs. And when you have a problem with jobs, fixing the mortgage isn't going to help -- you need to get back to work.

VIGELAND: Well then how many people currently in trouble are actually "helpable," do you think? We hear all the time that mortgage modifications and foreclosure delays just basically kick the can down the road.

RETSINAS: In large measure they do, they're not helpable if the only modification is to change the interest rate or extend the term. They're helpable, to use that phrase, if the investor and the servicer on behalf of the investor were willing to reduce the principle, or perhaps even suspend payments for a period of time. But there's a reluctance to do that, in part because it doesn't guarantee success, and in part because of other people saying, why not me?

VIGELAND: Of course the foreclosure process has not been a smooth one, really for anybody. We've had some recent news that several of the major banks has put a temporary moratorium on foreclosures because the so-called robosigners, where bank employees were basically signing off on foreclosure notices without even looking at the paperwork. Will this kind of moratorium actually help anyone, or again just delay things?

RETSINAS: It certainly points out that servicers were not prepared for the surge of foreclosures that took place. The processes they followed might have been good for a handful of loans, but not at the scale that they're dealing with. That's no excuse for them not to follow the rules and follow whatever the contract is. But for many people, it will only delay what will be the loss of the home. I go back again to this notion of people not working; if you're not working, getting a few more months to stay in your home doesn't necessarily help you keep your home. And indeed for the housing market at large, it just delays the clearing of these foreclosed homes.

VIGELAND: Let's talk quickly about a couple of other developments. The Federal Housing Administration is tightening its lending standards. A lot of critics have said that their standards got as loose as the banks' were back a few years ago. Is this going to help or hurt the current housing situation?

RETSINAS: The Federal Housing Administration really has to walk a balance beam. On the one hand, they want to continue to extend credit primarily to first-time home buyers who haven't been able to assemble and aggregate a large down payment that's now required. At the same time, their concern in so doing, they will experience losses. If they experience losses, they'll have to go back to Congress for the dreaded bailout. As I think we all know, the politics of the day don't particularly favor another bailout.

VIGELAND: And a lot of the big banks announced this week that they are not longer doing what's called "wholesale lending" -- basically they're not going to take loans that were done by mortgage brokers. Why are they making that move and what does that mean for people who want to get a mortgage?

RETSINAS: They're very concerned about their responsibilities and about their liability. Some of these same banks have been involved in the recent servicing fiasco. The difficulty is, as more and more of these lenders pull out of this business and close those channels, it'll just be fewer options, less competitive options, for potential homeowners. But if we completely shut the door to people who reach out and find these new homeowners, we're going to be shutting the door to lots of families.

VIGELAND: All right. Nic Retsinas, thanks so much.

RETSINAS: Nice to be with you.

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