The Campaign Spot

Examining the Meager Results of the Last Government Effort to Mitigate Hard Times

So today the president said (metaphorically), “I don’t care that Congress couldn’t find the votes to pass a bill to help the auto industry, I’m not having them go out of business on my watch, here’s $17 billion or so.”

Because throwing large amounts of taxpayer dollars at a problem always works. Just ask homeowners.

The new data presented today from a study by Professor Alan White, Valparaiso University School of Law, found that:
• Less than 10 percent of the time do the voluntary programs result in a reduced principal loan balance with more than half of modifications capitalizing unpaid interest and fees into larger and more drawn out debt on the back end of the mortgage; and
• Only about a third (35 percent) of voluntary mortgage modifications reduce monthly payment

burdens for homeowners, with nearly half (45 percent) actually saddling distressed homeowners with increased payments under the modifications.
In one case cited by the lawyers group — the Hope for Homeowners Act FHA refinancing program passed by Congress with much fanfare earlier this year on the strength of forecasts that 400,000 homeowners would be aided — there have been only 312 applications to date and no mortgage modifications whatsoever have taken place.
This is consistent with the most recent estimates from the National Association of Attorneys General that “nearly 8 out of 10 seriously delinquent homeowners are not on track for any loss mitigation outcome … up from 7 in 10 in previous reports.”

How could this be? How could a government program fail to solve the problem that it aims at?

The three-year program was supposed to help 400,000 borrowers avoid foreclosure. But it has attracted only 312 applications since its October launch because it is too expensive and onerous for lenders and borrowers alike, [Secretary of Housing and Urban Development Steve] Preston said in an interview.

“What most people don’t understand is that this program was designed to the detail by Congress,” Preston said. “Congress dotted the i’s and crossed the t’s for us, and unfortunately it has made this program tough to use.”

Well, by ignoring Congress, the administration will avoid that problem.


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