Q: What was this notarization bill Obama pocket-vetoed, and what has it got to do with the foreclosure crisis?
A: It required states to accept documents notarized from other states that have more lax notarization requirements. In effect, whichever state came up with the most loosey-goosy notarization rules could set itself up as Notarizationland for the entire country in much the same way that Delaware has set itself up as Incorporationland. Sponsored by Rep. Robert Aderholt, R-Ala., the bill was previously viewed as an uncontroversial measure to help bring the notarization process into the computer age. * "I first introduced this legislation in April of 2005," Aderholt huffed after Obama vetoed the bill, "and obviously there was no concern about weakening the foreclosure documentation process at that time." He is correct; the bill wasn't intended to encourage shoddy foreclosure paperwork. But Elizabeth Warren, de facto head of the new Consumer Financial Protection Bureau, perceived, correctly, that it would very likely have that effect and persuaded President Obama to block it.
The GMAC deposition suggested that notaries working in foreclosure mills don't perform anything like the oversight role they're supposed to. (GMAC's Stephan: "After I sign it, it is handed back to my staff. My staff hands it to a notary for notarization." Attorney Cox: "So you do not appear before the notary; is that correct?" Stephan: "I do not.") This would therefore not seem a good moment to ease up on their regulation.
Q: Senate Majority Leader Harry Reid, D-Nev., has called on all mortgage lenders in Nevada to halt all foreclosures until the legal questions surrounding robo-signing are resolved. Is this stupid political grandstanding by an incumbent facing a tough re-election?
A: That goes without saying. The more difficult question is whether a moratorium would be a good idea, anyway. The Obama administration has rejected this option for fear of doing further damage to the housing market, which remains a drag on the economy. Housing can't recover until the backlog in foreclosures is cleared and lenders can take the money they're currently spending managing real estate they own but don't want and redirect it toward new mortgages. And, besides, two of the four biggest mortgage lenders—Bank of America and JPMorgan Chase—already have imposed complete or partial moratoriums of their own.
On the other hand, the other two biggest mortgage lenders—Wells Fargo and Citibank—have not. Wells Fargo is conducting a review of pending foreclosures, and Citibank is keeping a low profile. Fannie Mae and Freddie Mac imposed a foreclosure moratorium during the winter of 2008-09, at the height of the financial crisis, and the sky didn't fall.
But, on yet another hand, in the winter of 2008-09 the economy was already so deep in the crapper that nobody was likely to notice if a foreclosure moratorium made things a little bit worse. This time out, making the economy a little bit worse could put the country back into a recession.
OK, gotta go. Mr. Martini is a little behind on his house payments and we're making some adjustments. Remember, no man is a failure who has friends! Corrections, Oct. 13, 2010: This article originally misidentified HAMP as the Home Affordable Unemployment Program. (Return to the corrected sentence.) It also misidentified Rep. Aderholt as a congressman from Georgia. He represents Alabama. (Return to the corrected sentence.)
Corrections, Oct. 13, 2010: This article originally misidentified HAMP as the Home Affordable Unemployment Program. (Return to the corrected sentence.) It also misidentified Rep. Aderholt as a congressman from Georgia. He represents Alabama. (Return to the corrected sentence.)