The South Carolina Foreclosure Experiment

From the A.P.

South Carolina’s highest court on Tuesday temporarily stopped thousands of pending foreclosure sales in the state to give homeowners more time to take advantage of a new federal program to help them refinance mortgages.

The injunction — which mortgage experts said appeared to be the nation’s first court-ordered stop for an entire state — prevents judges in South Carolina from finalizing foreclosure sales on properties guaranteed by Freddie Mac, Fannie Mae or any other mortgage company that has signed on to a federal assistance program.

I find this a little troubling considering Fannie and Freddie recently lifted their national moratorium on foreclosures, and the injunction was initiated by a Columbia attorney representing Fannie Mae.  I find interesting the statement “homeowners who might be eligible for federal assistance from being shut out of the process“.  So, Fannie wants to protect homeowners who “might” be eligible for assistance, and that’s their only motivation?

South Carolina’s unemployment rate for March was something like 11.4%, which was only surpassed by Oregon and Michigan.  High unemployment rates and a fairly high foreclosure rate can cause significant deterioration in housing prices in a given area, Detroit, Michigan is a pretty good example of that.

Bubbles pop, and the pain associated with that process usually cannot be minimized effectively.  I’m sincerely hoping the GSE’s aren’t attempting to sweep bad news under the proverbial rug, but are actively trying to get specific loans performing again.