Sometimes doing nothing is the best option…

There was a story this morning in the Realty Times real estate news feed that I get every day about the California Association of Realtors (CAR) opposition to the new law proposed by the California Attorney General which would make laws out of many of the provisions of the recent class action lawsuit concerning foreclosures (robo-signing and the like were the issues in the suit). In this case, while the CAR applauded the lawsuit and the settlement, it is opposing the new law. The logic is simple – the proposed law would effectively hamstring lenders in any future efforts to foreclose on bad loans and extend too wide of an umbrella of protection over so-called “strategic defaulters” and deadbeats. Another part deals with the eviction process for tenants in foreclosed homes and greatly extends that process. A similar law passed in Nevada and has effectively shut down the foreclosure process there.

Those seem like fair things to put in a law, so why the opposition? It’s that old legislation bug-a-boo – the unintended consequences of seemingly good laws. In this case the fear is that lenders, faced with onerous restrictions on their future ability to take foreclosure action, will shut down lending.  The argument is, “why would lenders take the risks involved in mortgages without the ability to take foreclosure actions at a reasonable cost and within a reasonable timeframe?”

This is probably a classic case of where doing nothing is the best course of action. Unfortunately it is not playing out at the Federal level where doing nothing is the order of the day. It is also playing out right now in California, one of the most liberal and activist states in the union. I suspect that most people might agree that lenders needed to be taken to the woodshed for some of their foreclosure practices; however, the thought of a bunch of legislators (no matter where) trying to figure out and put into law “what is good for us” is just scary.

Please help us all out here and do nothing. Thank you.