Once again, the president has chosen a politically driven policy of targeted junk for favored constituencies over a clear, pro-growth approach to the problem of the day. The president claims today’s tweaks are just pieces of a larger housing recovery strategy, but the entire strategy of 22 separate initiatives appears to be riddled with more of the same: piecemeal goodies as he panders his way toward the November election. As a recovery strategy, today’s proposal is laughable. If former President Clinton used to be accused of playing small ball, this is playing BB ball.
The administration quietly released their “Housing Scorecard” at 4:30 p.m. this past Friday, hoping nobody would notice that $45 billion of home equity has been lost over the last quarter and 396,000 more Americans are in underwater mortgages. Taxpayers deserve more than this.
Let’s look at the details.
Review of foreclosed veterans and service members. The banks have agreed to review the file of every service member foreclosed upon since 2006 and compensate accordingly. They’re also going to pay $10 million into the Veterans Affairs fund that guarantees loans for veterans. But this is on top of the $25 billion settlement on claims of abuse in the foreclosure process by all homeowners announced less than a month ago. Righting wrongs is important, but as I feared, that $25 billion appears to be just a down payment sought by the administration. When will the administration let the housing market move onwards and upwards?
Reduction in refinancing fees for FHA-backed loans: First of all, the FHA is broke, so in what world would this ever be a good idea? This comes on the heels of the FHA acknowledging this and raising the premiums for new borrowers by 0.75 percentage points. Raising premiums here, lowering fees there, does not a housing recovery make.
Who does this help? Only those current on their payments, whose loans were initiated before 2009. The president estimates this will save this targeted group of 2 to 3 million borrowers a very modest savings of about 80 bucks per month. So, are these the homeowners we need to help? Every homeowner needs help. Is this the way to do it? Absolutely not.
Today’s handouts are just a drop in the housing-recovery bucket. We were promised that the president would help up to 9 million families avoid foreclosure. Let’s look at how that’s fared. Through TARP’s Home Affordable Modification Program’s (HAMP) permanent loan modifications, 951,000 homeowners were helped. As Neil Barofsky, former special inspector general for TARP, aptly put it at the Financial Services Committee, HAMP “has been a failure.” How did the Home Affordable Refinance Program (HARP) stack up? Not much better. Their refinances have helped 998,000 homeowners. Nearly 80 percent of the 9 million the president promised to help have been left in the cold.
So, what can we do to actually get the housing recovery on its way? I’ve said this time and again, but let me repeat myself. The $700 billion equity hole requires rapid economic growth. When the economy recovers, so will the housing market. Real growth will generate jobs and income, which will in turn alleviate the problems plaguing the housing market — a weak labor market and income losses. Real help for homeowners, not an extra $1,000 a year to a political constituency, will come from getting the macroeconomy growing faster, by adopting logical pro-growth solutions, not adding to the financial uncertainty of the already fiscally unsound FHA.