Wednesday, October 13, 2010

Obama Vetoes Foreclosure Bill, Citing the Need for Greater Consumer Protections

The Los Angeles Times: General Freeze on Home Seizures Sought
CNN Money: Obama Vetoes Bill to Speed Foreclosures
The White House: Why President Obama is Not Signing H.R. 3808
The New York Times: Obama to Veto Bill That Could Speed Foreclosures

White House officials announced this week that President Obama would veto H.R. 3808, the Interstate Recognition of Notarizations Act of 2010 (IRON). Obama’s veto will send the bill back to the House of Representatives. The White House cited its concern about the impact of the bill on consumers as the reason for the President’s use of veto power. Before and during his presidency, Obama has voiced his concern for consumer protections. Earlier this year he urged Congress to pass the Wall Street Reform and Consumer Protection Act. Although he ultimately vetoed the bill, Obama promised to work with Congress to reform the bill in order to ensure IRON adequately protects consumers.

IRON tried to clear the backed up judicial dockets by making it easier for courts to approve foreclosures. IRON would have compelled courts to recognize foreclosure records that were notarized in other states. Critics of the bill argue that IRON would make it harder for consumers to dispute the accuracy of such documents. Critics argue that this would be an unfortunate obstacle for consumers, especially when at the present time there have been increasing reports of improper foreclosures.

Recently consumers and consumer advocate groups have made allegations that in thousands of cases loan servicers have not been verifying required legal documents. The Center for Responsible Lending indicated their belief that the improper foreclosures are a result of the lenders’ flawed infrastructure and the lack of employees capable of dealing with homeowners who default on their mortgages. Because of these accusations of improper foreclosures, consumers and government leaders have pressured banks in the United States to halt further foreclosures.

Several major lenders, such as JP Morgan Chase and Bank of America, have decided to freeze foreclosures in the twenty-three states that mandate their judicial systems approve foreclosures. In the other states, foreclosures continue. The banking industry warns that the halt of foreclosures will hurt the housing market’s recovery. With IRON back on the House agenda, lawmakers will be forced to attempt to balance the interests of the banking industry and consumers if they desire IRON to become law.

1. What are some of the benefits of having a bill similar to the Interstate Recognition of Notarizations Act of 2010 becoming law? What are some disadvantages?
2. What are some reasons why states might require judicial approval of foreclosures? Are there downsides to this procedure?
3. Should the government force lenders to put a moratorium on foreclosures until investigators clear any allegations of improper foreclosures? Why or why not?

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