Treasury Does Not Believe in Foreclosure Armageddon

foreclosure3 2 Treasury Does Not Believe in Foreclosure ArmageddonThe Treasury Department believes that the so-called putbacks of bad mortages to financial institutions do not pose a systemic risk, Reuters reports.

Speaking before the Congressional Oversight Panel Treasury Homeowner Preservation Office head Phyllis Caldwell said that home prices may decline and the housing market may be clogged with homes that are tied up in legal disputes, but the Treasury doesn’t see current foreclosure troubles as enough to trigger a system-wide crisis.

That assessment may come as small comfort to some people, like FDIC chair Sheila Bair, who on Monday said that federal officials — and financial firms — should’ve started asking questions when it emerged that banks were reducing the costs involved in foreclosing on homes. Failure to spot the current situation ahead of time hardly lends credibility to Treasury’s current claims that it’s on top of the situation and everything’s fine.

Perhaps, then, it’s not surprising that not everyone on the CBO panel agreed with Caldwell. Panelist Damon Silvers said, for example, “It is not a plausible position that there is no systemic risk here.”

mtaylor [at] observer.com | @mbrookstaylor