I wanted to circle back to this point I made on our foreclosure panel that I really do think expresses both the frustration and the danger I and some other commentators are feeling about the situation. Simply put, HAMP is hurting liberalism. It’s putting a face of bureaucratic incompetence on a program designed to help people. It’s making the lives of its participants worse while promising to make it better. It’s adding to their indebtedness and failing to reduce their principal.
Of course, we know that it’s not a liberal program in any way, with its maddening structure as a public-private partnership where the lender doesn’t have to make any changes to the mortgage unless they determine it in their best interest to do so. And that design was a conscious choice, not the result of legislative compromise. I have to laugh at that sliver of the liberal commentariat who constantly excuses the President and the Administration for having to make painful choices given the Congress they have. The President, you see, isn’t that powerful, and must work within those legislative constraints. But none of this is true with respect to HAMP. The Administration designed this entirely on their own, using money already appropriated. And they designed it terribly.
In fact, they lied right from the beginning, according to Sen. Jeff Merkley, who was also on the panel. He was told that the White House would devote $50-$100 billion in TARP money to homeowners and that they would fight for cramdown (what he would rather call lifeline bankruptcy) when it came up in Congress. These were the conditions under which Merkley voted to release the second tranche of the TARP money. And neither of these two things really came to pass. The White House stood mute as cramdown failed, and though HAMP is supposed to have $75 billion in backup, they’ve spent less than one-half of one percent of it.
Without the threat of a bankruptcy judge modifying the mortgage as a hammer on the side of homeowners to get lenders to comply, the HAMP design totally failed. It was no longer in the financial interest of the lenders to do anything, and so millions of people come into a system and get really nothing out of it. They end up more indebted and just float along, propping up the banks who don’t want to acknowledge the bad loans still on their books. This was the Administration’s design, specifically Gene Sperling’s design, according to reports. And as I said on the panel, he should be fired for the damage he’s causing. Obama is famous for saying he only cares about what works. Well, this isn’t working.
The more important damage is to those getting no relief on their mortgages, falling victim to predatory lending for the second time, first from the loan officers and now from the government. But on another level, it’s only confirming what Ronald Reagan famously said, that the most dangerous words in America are “I’m from the government and I’m here to help.” That’s true when a neoliberal, extend-and-pretend scheme designed more to save the banks from reality than help people gets implemented. Those people getting foreclosed or losing everything they’ve got can point the finger at one thing, that government didn’t provide a safety net for their struggles. As Elizabeth Warren said on the panel, in the 1930s we had a belief that government could step in and help us with our problems. And that has faded. It faded over the last thirty years with a coordinated demonization of government and it’s fading now because the group in the White House has a different worldview, one oriented toward the banks over the people. And so how can you tell the guy in this story to vote for Democrats ever again?
WASHINGTON – The Obama administration’s effort to help those at risk of losing their homes is failing to aid many and could spur a rise in foreclosures that would further depress the housing industry.
More foreclosures would force down home prices and that would deter already-ailing homebuilders from starting new projects.
As a result, the economic rebound could suffer. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders.
“Foreclosures hold down the pricing for everybody,” said Marty Mitchell, vice chief executive officer of Mitchell & Best Home Builders in Rockville, Md. “As a builder, we have to be cognizant of foreclosures, if there are more coming along, because it affects pricing across the board.”
Home construction plunged in June to the lowest level since October, the Commerce Department said Tuesday. Driving the decline was a more than 20 percent drop in condominium and apartment construction, a small but volatile portion of the housing market. Construction of single-family homes, the largest part of the market, was essentially flat.
Applications for building permits, a sign of future activity, were up slightly. But that was also the result of the volatile apartment market.
The home construction report was released one day after the National Association of Home Builders said its monthly reading of builders’ sentiment about the housing market sank to the lowest level since March 2009.
“We’re going to see very minimal new construction until the stream of foreclosures has ended,” said Jack McCabe, a real estate consultant in Deerfield Beach, Fla.
The glut of homes being sold at foreclosure or as short sales – when a bank agrees to accept less than the total mortgage amount – could rise even faster in the months ahead.
More than 40 percent of the 1.3 million homeowners enrolled in the Obama administration’s mortgage relief effort have fallen out of the program, the Treasury Department said Tuesday.
“The program really hasn’t helped a lot of people, or at least not nearly as many had been hoped for,” said Mark Zandi, chief economist at Moody’s Analytics.
Zandi predicts that about 2 million homes are likely to be sold over the next 12 to 18 months as foreclosures or short sales.
Many borrowers have complained that banks often lose their documents and then claim borrowers did not send back the necessary paperwork.
The banking industry said borrowers weren’t sending back the necessary paperwork. They also have accused the Obama administration of initially pressuring them to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.
Obama officials dispute that they pressured banks and they defend the program. Lenders are making more significant cuts to borrowers’ monthly payments than before the program was launched. And eight of the largest mortgage companies in the program have offered alternative programs to 45 percent of those who fell out of the program.
The government’s program “only reflects a portion of what’s happening in the broader marketplace,” said Raphael Bostic, an assistant secretary for at the Department of Housing and Urban Development.
While developers have cut back on construction and the number of new homes on the market has fallen dramatically, they still must compete against foreclosed homes.
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