Obama Administration’s $75Billion Housing Bailout Has Failed to Reach Goals
June 07, 2012
Owning a home has been an integral part of achieving the “American Dream” and hassupported communities and our economy alike. With that in mind, it’s easy to understand howthe housing crisis has impacted many corners of our nation’s economy. As of the end of 2010,23.1 percent of all U.S. homeowners with a mortgage owed more on their homesthan their homes were worth and at least 8 million Americans are at least onemonth behind on their mortgage payments. Solving the housing crisis and aidinghomeowners should be on the top of the President’s to-do list.
While posting an all-time record of 2.87 million U.S. households receivinga foreclosure filing in 2010, the Obama Administration sprung into action byunveiling a $75 billion Home Affordable ModificationProgram (HAMP). When the program was unveiled, theAdministration said by the end of 2012 it would help 3 million to 4 millionhomeowners “avoid foreclosure” by “reducing monthly payments to sustainablelevels.” Underthe program, the Treasury Department provides incentives for banks to modifythe mortgages of struggling homeowners. After an offer for a trial loanmodification is extended to a borrower, the borrower can then move towards apermanent mortgage modification by continuing to make payments for threemonths. However, in reports issued by the Treasury Department’sInspector General and the Government Accountability Office (GAO) have foundthat the program has had trouble even getting off the ground and has failed tohelp them projected number of homeowners.
In an audit of HAMP, TreasuryInspector General Neil Barofsky took the Treasury Department to task for what hesaid were the shortcomings of the program. According to ABC News, “The Obama administration's programto help struggling homeowners avoid foreclosure has posted ‘disappointingresults’ in part because its definition of success is ‘essentially meaningless.’”“To be meaningful, Treasury's goal for HAMP must relate to how many people arehelped to avoid foreclosure,” Barofsky said. “Plainly, the goal that should bedeveloped and tracked is how many permanent modifications HAMP generates thathelp homeowners avoid foreclosure and stay in their homes.”
Piling onto this criticism a GAOReport entitled Status of Programs and Implementation of GAORecommendations, found “that the program had a slow start andhas not performed as anticipated. While Treasury has added TARP funded housingprogram enhancements in an effort to reach more borrowers and addresspersistently high default and foreclosure levels, the newly announced programshave had very limited activity to date and Treasury continues to face challengesin expeditiously implementing a prudent design for these programs, as GAOrecommended in a June 2010 report. Treasury has not yet fully implemented.”
An editorial by the Wall Street Journal which ran on February 7th of2011, correctly assessed by all measurements the program was a failure and awaste of taxpayer’s dollars: “If youmeasure success by the housing market, HAMP has failed miserably. According toRealtyTrac, 2.9 million homes received foreclosure filings in 2010, up from 2.8million in 2009 and 2.3 million in 2008. The bellwether Case-Shiller home priceindex is falling again. HAMP is one more artificial prop to a housing marketthat will recover faster if foreclosures are allowed to proceed more rapidlyand the homes are resold. By all means give HAMP the hook.”
Well if a program isn’t working, the Government shouldshut it down and turn off the spigot of taxpayer funds right? Not in the Obama Administration.The Government’s housing website (www.makinghomeaffordable.gov) proudly claimsthat “effective June 1, 2012, the Obama Administration expanded the population ofhomeowners that may be eligible for the Home Affordable Modification Program.”If the Obama Administration won’t admit that their solution has failed, it’s upto Congress to end the funding for this program. Millions of taxpayers’ dollarsshouldn’t continue to be directed at saving home for only a few thousandAmericans. It’s time for Government to exit the housing business.