Has The Obama Mortgage Modification Program Failed?
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The Washington Independent — which tells us that it offers “national news in context” says that:
“President Obama’s mortgage modification program, known as the Home Affordable Modification Program or HAMP, was supposed to be the fulfillment of Obama’s promise to take care of Main Street more than Wall Street. Yet, just over a year into his presidency, Wall Street is on the rise and Main Street — or at least the homes that line it — remains on the decline. Not only has Obama’s $75 billion program failed to secure permanent mortgage modifation for more than 116,000 homeowners (while 3 million went into foreclosure) and not only does the Administration now say it won’t help more than 1.5 to 2 million homeowners overall, there’s actually more bad news: it seems to actively discourages lenders from loan forgiveness.” (See: Yet Another Failure for the Mortgage Modification Program, March 24, 2010)
Really? Is this news in context, national or otherwise?
Here’s some context.
Hope for Homeowners
The Bush Administration had two programs to help mortgage borrowers.
The Hope for Homeowners program resulted in 12 mortgages for distressed borrowers in fiscal 2010 and 23 loans in fiscal 2009. It says here that’s a total of 35 loans under the H4H effort.
FHASecure
Then, of course, there was the FHASecure program.
“The FHA will launch a new program called FHA-Secure, said President Bush in August 2007. “This program will allow American homeowners who have got good credit history but cannot afford their current payments to refinance into FHA-insured mortgages. This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes. In other words, we’re going to start reaching out and making sure people know that this option is available to them so they can stay in their homes.”
And how many delinquent conventional borrowers got new FHA mortgages under the FHASecure program? There were 3,794 conversions in fiscal 2008 and 316 in fiscal 2009 — that’s a total of 4,110 borrowers who were helped.
Meanwhile, the Treasury Department says that as of the end of February 2010, “more than one million borrowers were receiving a median savings of $500 each month – a 36 percent median monthly payment decrease. Permanent modifications have been granted to 170,000 homeowners and an additional 91,800 permanent modifications have been approved by servicers and are pending only borrower acceptance.”
The truth is that no federal program will save all homeowners. But even the Washington Independent should be able to see the difference between fewer than 5,000 homeowners saved with the Bush programs over several years and more than 170,000 permanent loan modifications in less than a year.
Blaming the Obama administration for the inability to help more mortgage borrowers is like complaining about ambulances because they’re loud. It makes no sense.
The mortgage crisis did not start on January 22, 2009. It started when the federal government stopped regulating and allowed lenders to make toxic loans.
The Federal Reserve, under the Home Ownership and Equity Protection Act (HOEPA), could literally have banned option ARMs, mortgage applications with no documentation and other “nontraditional” lending programs by defining them as “unfair and deceptive acts or practices.” Rather than use the authority it has had since 1994, the Fed did nothing to protect borrowers or mortgage investors.
And that’s a huge part of how we got here. Truth is, there would be no mortgage crisis today if the Federal Reserve had used its lawful authority. But then profits on Wall Street would have been smaller, bonuses would have been reduced and stock values would not have soared.
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