Mortgage Modifications: Bush Versus Obama
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It’s beginning to look like the government’s efforts to modify troubled home loans is beginning to pay off. As of the end of February more than 170,000 borrowers had obtained permanent mortgage modifications while more than 1 million more under the Making Home Affordable program are involved in trial modifications that could result in better long-term financing.
Critics of the program — and there are many and they are loud — will quickly overlook several issues:
First, not all borrowers are being helped. It’s true. But helping all distressed borrowers is not possible and has never been possible.
Second, the results are small compared to the problem. It’s true. But the problem of toxic loans did not start in 2009 when the Making Home Affordable program began, it started under the Bush Administration when lenders were allowed to ignore traditional underwriting guidelines and regulators did nothing to protect the public.
Third, no one will compare the Obama results to date with the results of the Bush Administration. But we will:
Hope For Homeowners under Bush resulted in 934 loan applications and 23 mortgage conversions.
The FHASecure Program was announced by President Bush in August 2007. At the time he said that “In the coming days, the FHA will launch a new program called FHA-Secure. 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.”
In total, about 4,100 delinquent conventional mortgages were converted into FHA loans under the program.
And people are complaining about Making Home Affordable?
Protecting The Public
Meanwhile, how many lenders have gone to jail for marketing dangerous financial products? How many toxic mortgages have been recalled?
In Connecticut, the state attorney general is suing several ratings companies because they allegedly “enabled the worst economic downturn in the nation since The Great Depression.
“The lawsuits, unique and unlike others filed on behalf of specific investors or pension funds, are sovereign enforcement actions brought under the Connecticut Unfair Trade Practices Act.
“Despite repeated statements emphasizing their independence and objectivity when rating structured finance securities, Moody’s and S&P knowingly failed to live up to their representations. In particular, their ratings on structured finance securities were tainted by their desire to earn lucrative fees.”
Why is it okay to protect mortgage investors but not mortgage borrowers?
Just asking, that’s all.
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