As lenders decided to halt foreclosures on some or all of their loans during December and well into January, industry participants are warning that a decision to enact a national foreclosure moratorium could have dire consquences for the economy and for housing. A few state leaders -- New Jersey governor Jon Corzine, among them -- as well as key federal lawmakers have suggested in recent months that a nationwide moratorium on foreclosures is needed to help solve the nation's housing woes. Industry insiders surveyed by New York and Dallas-based National Asset Direct Inc., a principal buyer of performing, sub-performing and non-performing residential assets, asks key market participants for thoughts on hot-burner issues each month. The December survey asked about the possible effects of a national foreclosure moratorium, with more than 46.3 percent of respondents suggesting that halting foreclosures would have a negative impact on underwriting criteria. Loan underwriting standards are already restrictive, and are preventing many borrowers from purchasing or refinancing; the survey's respondents -- which span the residential construction, mortgage originations, servicing, real estate sales, REO management, capital markets and investor/hedge fund fields -- suggest that a push to halt foreclosures is likely to make such criteria even more restrictive going forward. “The banks don't know how badly they’ve messed up and so they are like deer frozen in the headlights," said one respondent. "The people who can't pay for their houses need to be able to move on, not hang around longer. Do the short sales, do the foreclosures and get this mess over with.” "A national moratorium on foreclosure will drive up investor’s costs associated with foreclosure and increase loses associated with foregone interest income," explained Derek Martin, director of decision science at National Asset Direct. "This would increase actualized losses, as well as potential losses which would result in tighter underwriting guidelines and larger down payment requirements." Respondents were less certain what such a moratorium would do to interest rates, given the governments aggressive intervention into both primary and secondary mortgage markets to push rates downward. 38 percent suggested a moratorium would have a negative impact on mortgage rates. Most survey respondents said they see U.S. housing prices stabilizing sometime in 2010 and beyond -- 73.2 percent of those surveyed. 25.4 percent suggested home prices would stabilize in 2009. But the overwhelming theme, oft-repeated in comments by participants, was one of frustration at a market that isn't being allowed to clear. “We need to move forward and clean up the mess not keep trying to fix it," said one survey respondent. "Go back to basics.” Another voiced frustration with U.S. Treasury actions thus far. “The problem is being underestimated and has been from the beginning. I raised this at a public meeting with [Treasury Secretary Henry Paulson] in March [2008], and he told us that everything is under control. "In order to preserve an ideology he has sold us down the river." Write to Paul Jackson at