In the 1930’s, 25 states enacted moratoriums on foreclosures. The Michigan Moratorium Act meant that anyone facing foreclosure got an automatic 5 year stay on the foreclosure, with a judge ordering a reasonable payment based on the homeowner’s ability to pay. These laws were upheld by the U.S. Supreme Court in the case of Home Building & Loan Building Association v Blaisdell, which held that the people’s right to survive during an economic emergency superseded the contract clause of the U.S. constitution. The moratoriums were not a result of the generosity of the legislatures or the courts, but were a direct result of the actions of workers and communities flooding the streets and preventing the foreclosures that were being carried out. The legislatures and courts essentially ratified the moratoriums that were won in the streets.
The demand for a Moratorium on Foreclosures has never been more timely. Today, with the federal government owning or backing 75% of mortgage loans through Fannie Mae, Freddie Mac and HUD, and paying the banks full value for the inflated, fraudulent and predatory loans, the President has the absolute authority to implement a two year moratorium on foreclosures and foreclosure-related evictions through executive order. And the President could immediately authorize a reduction of the principal to actual market values on all mortgages owned by the federal government.
A Minnesota statute, approved April 18, 1933, declares the existence of an emergency demanding an exercise of the police power for the protection of the public and to promote the general welfare of the people, by temporarily extending the time allowed by existing law for redeeming real property from foreclosure and sale under existing mortgages. In support of this proposition, it recites: that a severe financial and economic depression has existed for several years, resulting in extremely low prices for the products of farms and factories, in much unemployment, in almost complete lack of credit for farmers, business men and property owners, and in extreme stagnation of business, agriculture and industry; that many owners of real property, by reason of these conditions, are unable and, it is believed, for some time will be unable, to meet all payments as they come due, of taxes, interest [p400]and principal of mortgages, and are, therefore, threatened with the loss of their property through foreclosure sale; that much property has been bid in on foreclosure for prices much below what it is believed was its real value, and often for much less than the mortgage indebtedness, resulting in deficiency judgments; that, under the existing conditions, foreclosure of many real estate mortgages by advertisement would prevent fair, open and competitive bidding in the manner contemplated by law.
The Act then provides, inter alia, as to foreclosure sales, that, where the period for redemption has not already expired, the mortgagor or owner in possession, by applying to a state court before its expiration, may obtain an extension for such time as the court may deem just and equitable, but in no case beyond May 1, 1935. The application is to be made on notice to the mortgagee. The court is to find the reasonable income or rental value of the property, and, as a condition to any extension allowed, is to order the applicant to pay all, or a reasonable part, of that value, in or towards the payment of taxes, insurance, interest and mortgage indebtedness, at such times and in such manner as to the court, under all the circumstances, shall appear just and equitable. If the applicant default in any payment so ordered, his right to redeem shall terminate in 30 days. The court is empowered to alter the terms of extensions as change of conditions may require. The Act automatically extends, to 30 days from its date, redemption periods which otherwise would expire within that time. It is to remain in effect only during the emergency, and in no event beyond May 1, 1935. Prior to that date, no action shall be maintained for a deficiency judgment until the period of redemption, as allowed by existing law or as extended under the Act, shall have expired.