US foreclosures: Between a rock and hard place

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US foreclosures: Between a rock and hard place

A stand against foreclosures might be a vote winner but it has deleterious economic consequences.

As the mid-term elections in the US took place in early November, the foreclosure crisis gave those running for Senate and other elected positions the perfect weapon to add to their agenda. Several judges looking to be reappointed seized the opportunity by refusing to grant eviction of property owners in foreclosure without the lender offering proof that robo-signers were not used or that documentation had been rechecked. It’s an easy vote winner among an electorate that has seen unemployment increase since the presidential elections two years ago, and that feels the US administration has been apathetic in punishing the banks for the financial crisis.

"I will protect you against the evil banks" is a mantra that is deemed to swing voters who are sitting on the fence.

Such a policy might win votes but the implications are too damaging in the long term for such political pandering to be acceptable. For one, property owners of houses in foreclosure are also less likely to keep up to date in paying property taxes. When a house is foreclosed and taken back by the bank and sold, backdated property taxes get split between the seller and the buyer, and future property taxes will be paid by the new owner.

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