I agree with David Dayen and, via block quoting, Adam Levitin – I don’t see why mortgage servicers wouldn’t be equally bound to FHA requirements for foreclosure and HAMP guidelines. But like Duncan Black, I really don’t see why it has to be up to the courts to make this determination. Why wouldn’t Treasury be requiring compliance for servicers? Enforcement is good in any form – regulatory or judicial – especially if it means servicers aren’t stealing peoples’ homes through fraud-driven foreclosures.
But, most importantly, it should be crystal clear at this point that an economy with no rules for anyone is a very scary thing. That’s why lines like this in Ezra Klein’s column on “Obamanomics” is so troubling:
The administration didn’t have time for philosophy. It had to put out fires – and fast.
While I appreciate the correct feeling of urgency, there’s a big difference between just doing something that allows you to say, “We did this and the fire is out,” and doing what is actually the correct thing in a given situation based on the facts and how the given fire was created. While the fire department will respond to a burning building that is started by a lightening strike in the same way as the one that is started by an arsonist, the fire department also will do investigatory work to figure out how the arsonist set his blaze and work with the police department to bring the arsonist to justice to prevent him from starting more fires in the future. Even if you were to stipulate that the administration has succeeded in putting out fires from the economic crisis – something which I would only do in qualified ways while pointing out some fires are blazing stronger than ever – the lack of a consistent effort to arrest the proverbial arsonists who are burning up our economy is a real problem. To put it simply, there are ways to stop economic fires from being started by the same people over and over again: enforce existing rules, investigate how they were broken, and prosecute those who broke the law (and those who continue to break the law) in order to maintain the rules of our economy and the rule of law. And when you set new regulations with the hopes of putting out ongoing fires, make sure you enforce them.
The Obama administration inherited a terrible economic situation. Wall Street was still on the verge of collapse, unemployment numbers would balloon in coming months, and the contraction of the housing bubble would still have years of pain to go through. No president in my lifetime has walked into office with a worse economic situation. But at some point the actions the administration takes have to move beyond thinking that any action they’ve taken is, in fact, “getting the policy right.” I’m not sitting here opining for punishing banksters and lowering unemployment because I like the politics of it — this is what needs to happen from a policy perspective to ensure economic growth and stability. So instead of watching the courts try to rein in mortgage fraudclosure from afar, this is a perfect place for the regulatory bodies in the executive branch to step up and enforce their regulations. Again, this isn’t politics, this is policy in action.