Three weeks before the election, anger over tainted home foreclosure documents is bursting into the battle for control of Congress, especially in hard-hit states such as Nevada and Florida. Democrats in tight races in the worst housing markets are pressing for a national moratorium, putting a reluctant White House on the spot.
Leading the call for a nationwide time-out on kicking people out of their homes is Democratic Senate Majority Leader Harry Reid, who is locked in a neck-and-neck re-election contest with tea party-endorsed Sharron Angle in Nevada, which has the highest foreclose rate in the country. Reid is decrying "reports of shoddy and defective affidavit preparation."
On Wednesday, attorneys general and bank regulators in all 50 states announced a joint investigation into questionable foreclosure practices, including forged documents, apparently bogus signatures and questionable notarizations. U.S. Attorney General Eric Holder has said the Justice Department also is looking into the allegations — but he stopped short of opening a formal investigation.
While the allegations have suddenly become part of the political dialogue in a volatile election season, politicians are all over the map on the issue, some fearing that direct government action could snuff out a fragile recovery. Some candidates appear to be ducking the issue entirely, leery or unsure how to address it.
Tea party activists and many mainstream conservatives strongly oppose any additional government intervention in the nation's economy, including a foreclosure moratorium. "You're going to shut down the housing industry. People have to take responsibility for themselves," said No. 2 House Republican Eric Cantor of Virginia.
For President Barack Obama, it's a dicey issue.
The White House doesn't want to be seen as acting to shield banks, which have been a frequent target for both parties. Wednesday's announcement by JPMorgan Chase & Co. that its profits jumped 23 percent in the July-September quarter — while much of the economy still struggles — won't win the industry any new fans.
But the administration also doesn't want to spook fragile housing and financial markets. "There are a series of unintended consequences to a broader moratorium," said White House spokesman Robert Gibbs.
One reason for the White House caution: No matter the outcome this Election Day, Obama will still have two years to try to right the economy. But for those on Nov. 2 ballots, the day of reckoning is a lot closer, the passions hotter.
Also, previous efforts by the Obama administration to intervene in the mortgage market have not fared well. That includes its plans to use $41 billion in money from the 2008 financial bailout program to help people refinance mortgages. Less than $1 billion has been spent and relatively few homeowners have been able to take advantage of the program.
More than 2 million households are now in foreclosure and an additional 5 million have missed at least one mortgage payment, according to Lender Processing Services Inc., a company that helps banks process foreclosures. In few places is the crunch felt as keenly as in Florida.
Rep. Debbie Wasserman Schultz, a top House Democrat whose Florida district includes Fort Lauderdale, backs a foreclosure moratorium and also wants to see direct government talks with the banking industry. A wave of foreclosures has been "extremely vexing" in her state, she says.
Miami native and documentary filmmaker Joe Cardona would probably benefit from a freeze on foreclosures. He said it would be "a respite" for himself, his wife and 3-year-old daughter. Cardona said the bank was unwilling to renegotiate their underwater loan to allow them to stay in the house. "We tried, and there was this complete unwillingness," Cardona said.
Democrat Joe Garcia is running for a House seat in a nominally Republican South Florida district that includes suburban areas where there is "a foreclosed home a block as a minimum."
He said a moratorium on foreclosures could help open "serious negotiations with the banks to keep people in their homes. ... People nationwide have lost 30 to 40 percent of their home value and that value goes down even more when the house sits abandoned and the grass is uncut."
To Cuban-born Jose Martinez, 65, a lifelong Republican from the Miami area who works in liquor manufacturing and export, "It seems like a joke that we are a country with laws and the banks keep stealing."
Since 2007, both California and Florida have seen average home prices cut roughly in half. But in California, whose economy is more diverse than Florida's, conditions are slowly improving. In Florida, foreclosures are still on the rise.
The state's court system is so swamped with foreclosure cases that judges are being called out of retirement to handle the workload. The average foreclosure in Florida takes nearly 600 days, among the longest in the nation. Florida is one of 23 states where foreclosures must be approved by a judge.
Mark Zandi, chief economist at Moody's Analytics and a specialist on housing and foreclosures, calls Florida the "poster child" for a bogged-down system. "And the Florida economy is still very troubled," Zandi said.
But Zandi says a moratorium "at this point would be an economic mistake."
"The sooner we work through these problem loans, the sooner the economy will take off," he said. "If we prolong the process, it will simply prolong our economic problems."
A moratorium would give homeowners facing foreclosure more breathing room. But it could backfire, stifling the fledgling recovery and keeping downward pressure on home prices, Zandi and other economists warn.
People trying to buy foreclosed houses could see the sales suddenly suspended. And those considering buying such a property might have second thoughts. Banks that followed sound foreclosure practices would be penalized along with ones that didn't.
Economists and industry defenders say a freeze could also penalize pension funds, insurance companies and investors who hold mortgage-backed securities. It could make new loans more expensive. And it could further weigh on mortgage giants Fannie Mae and Freddie Mac., putting taxpayers at greater risk of losses.
Tom Raum reported from Washington; AP Real Estate Writer Alan Zibel contributed from Washington.