Credit Contraction in Mazzhole-land

From the Boston Herald, we have Gov’s move may delay Mass. foreclosures.

Massachusetts has effectively become the first state in the nation to put a moratorium on foreclosures in the wake of a groundbreaking announcement by Gov. Deval Patrick yesterday, a top housing activist contends.

Patrick ordered state banking regulators to seek delays of up to two months in foreclosure proceedings against homeowners who have filed complaints with the Division of Banks.

Marks predicted that as many as 1,000 struggling homeowners working with his organization alone would soon be filing complaints with state regulators. There were roughly 20,000 foreclosure filings in the state last year amid an explosion in high-risk - and high interest rate - subprime mortgages.

This is one of the stupidest ideas ever.

Firstly, it makes a mockery of contract law (so expect a challenge in a court soon.)

Secondly, would you issue credit in this state if the contracts can retroactively be rescinded?

This means credit is going to contracting faster than the tightest, most fearful sphincter. And that's going to make a bad situation morph into a disaster.

Please remember that credit contraction is deflation.

Effectively, Mazzhole-land is voting itself out of the national mortgage market (just like New Jersey did with insurance in the 80's.)

“It is effectively a moratorium on foreclosures in Massachusetts,” said Marks, whose Jamaica Plain-based nonprofit has a nationwide network of offices. “It is a very big deal. We will bring the Massachusetts standard nationwide.”

Heaven forbid!