Peter Pays Paul

When governments intervene into private contracts it has long-term unintended consequences, and usually they are negative.

Read a blurb regarding the research from the St. Louis Fed on the downside of a moratorium on foreclosures.

Governments cause both immediate and long-term effects when they rewrite the terms of contracts between private parties, Wheelock argueded. “Although the economic and societal benefits of lower foreclosure rates are difficult to measure,” he said, “research shows that the foreclosure moratoria of the Great Depression imposed costs on future borrowers.”

Future borrowers were faced, according to the analysis and cited studies, with a restricted supply of loans and sky-high interest rates, because lenders needed to compensate for the possibility that their right to foreclose on delinquent loans would be constrained. Under the nation’s current turmoil, policymakers are scrambling to enact similar regulations as were made during the great depression, in order to limit the highest foreclosure rates since (what else?) the Great Depression.

Here is the link to the HousingWire.com article.
History Warns Against Foreclosure Moratoria: Study : HousingWire.

Here is a link to the St. Louis Fed report.

Update (HT: Tom Vanderwell)

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