Writes Steve Berger:
The idea of a foreclosure freeze is gaining lots of momentum in the senate. Nice magic bullet. Marginal borrowers will now have an incentive to default earlier than otherwise, mortgage lenders will see their cash flow reduced and the value of their collateral sink, which in turn will impair their ability to lend. That, of course, will put more downward pressure on housing prices and prolong the agony and market readjustment process. A housing recession will become a housing depression.
The impairment of contractual rights will make prospective lenders wary of lending or induce them to charge a higher rate to compensate for the uncertainty of their contractual rights being upheld putting yet further downward pressure on home prices.
A foreclosure freeze will also put Fannie and Freddie in even worse financial shape, if that is possible. Now that they are backstopped by the federal government this, of course, means that the cost to the taxpayer will be that much higher either through greater taxes or currency debasement if more money is printed to fill the gaping black financial hole.
If only one senator had read Bastiat.
And these are merely some of the economic effects. Impairment of contractual rights is abhorrent to those with any semblance of respect for libertarian principles, the rule of law, or the constititution as originally conceived
Ron Paul has a lot more educating to do!