Now here is a uniquely bad idea for coping with the housing crisis:
SAN DIEGO (Reuters) - San Diego City Attorney Michael Aguirre said on Wednesday he filed a lawsuit against Bank of America Corp and its Countrywide unit to prevent the mortgage lenders from foreclosing on homes in his city, which he aims to make a “foreclosure sanctuary.”
Here’s a link to the whole story.
There are so many things wrong with Aguirre’s idea of making San Diego a “foreclosure sanctuary” that it’s hard to know where to begin.
*If he gets his way, you can bet the supply of new lending to San Diego will dry up instantly. What idiot would make a loan knowing that borrowers are shielded by the city from ever having to pay back?
*A “foreclosure sanctuary” would protect the guilty along with the innocent. And there were plenty of guilty in San Diego, which experienced some of the most extreme speculation in the country. Why should people who bought homes with next to nothing down, intending to flip them for a quick profit, be protected because they got caught swimming naked when the tide went out?
*San Diego would expose itself to lawsuits by creditors, who would have a good argument that the city has no right to prevent them from trying to collect. A big lawsuit is the last thing San Diego needs right now. It has had its share of municipal disasters over the years (a public pension mess caused mayoral candidates to flirt with the idea of declaring municipal bankruptcy in 2005).
I liked this blog on the topic.