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Obama Socialized Housing Policy: If At First You Don’t Succeed . . . Try, Try, Again

By Larry Doyle on December 1, 2009 at 10:00 AM in Economy, Housing & Housing Crisis, Mortgage Crisis, Mortgages, Sense on Cents (Larry Doyle blog)

The fact that the Obama administration is reticent to release data pertaining to completed mortgage modifications speaks volumes as to the lack of success of this initiative. With almost a third of American homeowners now ‘underwater’ on their mortgages, Obama and team are sticking to their game plan to modify mortgages. Details of Obama’s revised game plan can be accessed at MakingHomeAffordable.gov:

The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) today kick off a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Obama Administration’s Home Affordable Modification Program (HAMP) convert to permanent modifications. The modification program, which has helped over 650,000 borrowers, is part of the Administration’s broader commitment to stabilize housing markets and to provide relief to struggling homeowners and is a primary focus of financial stability efforts moving forward. Roughly 375,000 of the borrowers who have begun trial modifications since the start of the program are scheduled to convert to permanent modifications by the end of the year.

375,000? I will take the under on that. Why? As I highlighted on October 29th in my commentary “Mortgage Modifications: Statistically Insignificant”, up to that point a whopping 1,080 mortgages had been successfully and permanently modified. Policy makers believe 374,000 mortgages will be successfully and permanently modified in the last ten weeks of the year. Who’s zooming who? Would they like to place a wager on that? I’ll give odds.

Through the efforts being announced today, Treasury and HUD will implement new outreach tools and borrower resources to help convert as many trial modifications as possible to permanent ones.

Without spending excessive time detailing the administration’s efforts, the fact is very little has changed with their basic approach. They will attempt to facilitate the modification process by compelling mortgage servicers to perform.

Servicer Accountability. As part of the Administration’s ongoing efforts to hold servicers accountable for their commitment to the program and responsibility to borrowers, the following measures will be added:

– Top servicers will be required to submit a schedule demonstrating their plans to reach a decision on each loan for which they have documentation and to communicate either a modification agreement or denial letter to those borrowers. Treasury/Fannie Mae “account liaisons” are being assigned to these servicers and will follow up daily as necessary to monitor progress against the servicer’s plan. Daily progress will be aggregated by the end of each business day and reported to the Administration.

– Servicers failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions.

If in fact they do not perform or are delinquent in the process, the administration has agreed to publicly highlight their ineptitude. I read this as shaming them into performing. Does the administration truly think that approach will work? How do you shame the shameless? The banks that originate and service these mortgages are so far beyond being shamed that the mere thought of the administration considering this approach is comical.

Shaming banks at this juncture is the equivalent of stating, “the beatings will continue until morale improves.” The problem is the banks are not receiving the beatings but au contraire, the banks are dispensing the beatings on both Washington and America.

Make no mistake, Wall Street still owns Washington. Socialized housing is akin to pissing into the wind. Where is this headed? Do not be surprised to see the Obama administration look to reignite efforts for mortgage cramdowns in which mortgage principal is reduced.

LD

  • http://www.noquarterusa.net/blog/2009/11/27/what-i-now-love-about-the-holidays-thanks-to-the-crobonomy/ Silence Dogood

    One can not build a home made of cards and expect it to stand. Pun most certainly intended.

  • Peggy Sue

    Larry said:

    “Who’s zooming who? Would they like to place a wager on that? I’ll give odds.”

    and,

    “How do you shame the shameless?”

    This is like watching the clown cars at the circus. I’m beyond the point of being aghast. Now it’s a matter of waiting for the whole damn thing to blow up, which, of course, it will. The pain will be immeasureable and will be on the backs of ordinary Americans–you, me, everyone.

    There are sane voices out there. Like yours, Larry. Too bad Washington is deaf and compromised. This is not a Democratic or Republican problem.

    This is a thoroughly corrupt government at its finest. They will not quit until the whole house burns down.

    Sickening! But absolutely predictable. Deja vu [for those who read history].

  • elaine

    Sounds like the Community Reinvestment Act bucked up on steroids. Contract law takes a swift kick in the butt as “From each according to his ability to each according to his needs” trumps the day. I can’t see any real answers here, every solution ripples into new problems. I’m amazed the mortgage backed securities holders haven’t filed a million lawsuits, although what would it get them? With 1/3 of the mortgages under water…Congratulations to all the lefties who’ve for decades bemoaned our high standards of living, we’re on the road to Argentina now, a few more hard left turns & we may arrive in Zimbabwe.

  • elaine

    This is the CRA on steroids, the big booster shot. I’m surprised the mortgage backed securities folks haven’t launch a million lawsuits, although what would it get them? Who cares about contract law anyway? It’s all a joke when big gov holds the tax gun & can aim it at anything it chooses. I watch as investors cram 7 or 8 unrelated people into 2 bd 1 bath houses, sleeping in the living room, sleeping in the dining room, cars clogging the streets…know a 77 yr old woman who got a deal 6 years ago on a house under the CRA with a 30 year mortgage, she just got a big cram down & is once again making very bad financial decisions…why not? Punish savings reward debt & this is only the beginning. Turn left for Argentina, turn left again we might make it to Zimbabwe, share the wealth until the wealth runs out. That’s the plan, isn’t it?

  • elaine

    trapped in the spam filter

  • sybilll

    My next door neighbor was the epitome of the ARM reset bunch who bought way too much house. She fell behind a few months, and in August, she did in fact get a loan remodification. Trouble is, she found out this week that it is reported to her credit as though she filed Chapter 13. Thought you’d be interested. Of course my brainiac neighbor’s response was that would indeed filed Chapter 13 had she known, to get out from her car note (underwater), and her credit cards. Monsters. We created them.