Is the Obama administration’s signature foreclosure relief program succeeding? Absolutely, according to Treasury Secretary Timothy Geithner, who last Thursday trumpeted the news that 500,000 mortgages had been modified—on a trial basis—under the Home Affordable Modification Program, a month ahead of the administration’s November 1 benchmark for reaching this goal. A day later, however, the Congressional Oversight Panel (COP) reached a far different conclusion when it released its own evaluation of the Treasury Department’s foreclosure prevention efforts. According to the financial watchdog, the efficacy of HAMP is very much in doubt, and the program may wind up doing little to assuage the growing foreclosure mess.

While Geithner described reaching the 500,000 milestone as “an important shift,” a closer look at what this figure actually means suggests the administration remains a long way off from providing the widespread mortgage relief President Obama pledged in February, when HAMP was first unveiled.
Under HAMP, borrowers apply for modifications through their mortgage servicers, which receive incentive payments from the government for changing the terms of eligible mortgages to lower monthly bills. If accepted into the program, homeowners enter a three-month trial period. To expedite the process, servicers are allowed to begin the trial period without official income information. After the homeowner successfully completes the trial period, though, the servicer must use official documentation, which could lead to recalculating the monthly mortgage bill and a fluctuation in price. If all goes well, the result is a 5-year loan modification that is supposed to help beleaguered borrowers keep their homes.

But 500,000 three-month test runs don’t translate into 500,000 rescued homeowners—far from it. Here are a few scenarios that illustrate why: John Doe could miss a payment during the trial period and get kicked out of HAMP. Sally Smith, on the other hand, could complete the trial period, only to receive higher payments she can’t afford when her permanent modification is recalculated, forcing her into default. Finally, Jane Jones could last two or three years in HAMP, but suffer some form of financial hardship—a medical emergency, bankruptcy—and wind up in jeopardy of foreclosure once again. Each of these borrowers would be included in the half-million figure Geithner cited, but ultimately HAMP would have failed them.

Joseph Smith II, the president and CEO of Default Mitigation Management, a private loan negotiation and technology company, estimates that about half of the trial modifications won’t become permanent ones. And a significant percentage of permanent modifications will also fail, he adds. The Treasury’s half-million figure, Smith says, “is political spin.”

According to the COP, HAMP’s initial results have been underwhelming. As of Sept. 1, the panel reported, the program had resulted in just over 1,700 modifications—a sliver of the millions of mortgages on the brink of foreclosure. And as the watchdog’s report points out, those permanent modifications hardly guarantee long-term success.

What’s more, the COP report says that HAMP is ill-suited to help the kinds of homeowners facing foreclosure in the near future. Housing experts and government officials predict a new wave of defaults on so-called payment option adjustable rate mortgages—which allow borrowers to initially make low, often interest-only, loan payments before payments adjust, resulting in monthly bills that can double or triple—and other risky loans that are set to jump in price in the coming months. But as the COP points out, HAMP’s guidelines could exclude many homeowners with these types of mortgages, leading the watchdog to conclude that “HAMP is targeted at the housing crisis as it existed six months ago, rather than as it exists right now.”

Already the Treasury has revised its outlook on how many modifications the program will provide. Where initially HAMP was expected to aid between 3 and 4 million homeowners, now the agency says it will modify at most 2.6 million mortgages at an estimated cost of $43 billion. Even if it succeeds in reaching this target, this effort will help only a fraction of the 13 million homeowners expected to wind up in foreclosure in coming years.

HAMP’s shortcomings have led to rumblings in Washington about reviving the process of modifying mortgages in bankruptcy courts, known as “cramdown.” The Senate killed such an effort earlier this year and the mortgage industry is bitterly opposed. Both Sen. Dick Durbin (D-Ill.), the Majority Whip, and Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, have expressed concern with HAMP and support for cramdown. Without specifically mentioning court-negotiated modifications, the COP’s report exhorts the Treasury to “consider whether new programs or program enhancements could be adopted” to recalibrate its foreclosure prevention strategy. Either way, it’ll take more than rosy statistics to rescue the millions of homeowners barely holding on.

Data released from the Mortgage Bankers Association shows the Obama “mortgage-rescue plan” has been a total failure. While the Obama regime boldly predicted that “4 to 5 million”Americans would he helped by the plan in the first year, after three months only 13,000 mortgage-refinancings have been executed by U.S. banksters as part of this program. This works out to only about 50,000 when projected over a full year, or about 1% of Obama’s absurd prediction.

As I pointed out more than two months ago (see “Obama’s mortgage-rescue plan: give banks money”), there was never any possibility that this sham/band-aid would accomplish anything. The plan called for the Obama regime to give banks “incentives” – with absolutely no strings attached.

The cooperation of the banks was totally voluntarily. Even worse, there is no oversight or auditing of this program. This means that U.S. banks are free to pretend they are helping millions of Americans, pocket the “incentives” (i.e. hand-outs), and walk away.

The MBA has now revised downward its estimate of the total dollar value of refinancings for this year by 30% – from an estimate made only three months earlier. Expect the real numbers to end up being much worse still.

Even the propagandists at CNN have been forced to acknowledge that yet another “housing fix” is turning out to be nothing but more empty promises. However, this didn’t stop CNN from mounting an absurd defense of this failure: the reason why the program has been such a dismal disappointment was because too many people applied for refinancings.

Naturally, this nonsense does not hold up to scrutiny. Further on in the CNN article, it was stated that with the banksters “flooded with requests”, they would handle “the easiest ones first.” Of course, if they really were “flooded with requests” and were handling them as efficiently as possible, then we should have expected a large number of “mortgage rescues” rather than virtually none.

CNN went on to “predict” that if the volume of total applications dropped that the number of “mortgage rescues” under the Obama plan would rise. In reality, data over the last month has shown the volume of mortgage applications has collapsed, with the biggest drop occurring in refinancing applications. In other words, this nonsense has already proved to be false.

As I have been writing for nearly a year, there is an obvious conclusion to be drawn from the fact that two, successive U.S. governments have done nothing more to fix the U.S. housing collapse other than make one empty promise after another. The U.S. government does not want to keep Americans in their homes, it wants to push them out. In a previous commentary (“U.S. government paying homeowners to walk away”), I pointed out how the U.S. government has been quietly slipping financially-devastated Americans a cheque for $1000 – to get them to vacate their homes.


Of course, neither the Obama regime nor the U.S. propaganda-machine want to publicize this government program, so there have been no aggregate figures released. However, obviously the total number of Americans pushed out of their homes over the last three months would have exceeded the pitiful total of those who were (temporarily) “rescued”.

The natural question to ask is: why would the U.S. government want Americans to lose their homes? The answer to that question comes in two parts. First of all, echoing a recent quote from Senator Richard Durbin (“U.S. Senator: Banksters “own” Congress”), the U.S. financial crime syndicate “owns” the U.S. government – having paid for it in “installments” (i.e. campaign contributions) over the last twenty years. (Indeed, no one in the U.S. government was raking in contributions from U.S. banksters faster than Obama, himself.)

This is hardly a secret. With more than 90% of all bail-out dollars going straight into the vaults of U.S. banks, U.S. politicians have left no doubt about whom they are working for.

Secondly, why would the banksters want Americans thrown out of their homes? Simple. To start with, U.S. banks have been explicitly permitted to hide their trillions in losses, through fraudulent accounting (see “FASB strong-armed into mark-to-fantasy accounting”). Furthermore, they have already proven they can order (and, if necessary, extort) all the trillions of dollars they need in hand-outs to ensure their own survival.

Thus, ultimately, the banksters will be scooping up trillions of dollars of U.S. real estate through foreclosures (i.e. for free), and when U.S. real estate values eventually begin to re-inflate some time around the middle of next decade, they will make fabulous gains on this real estate. For those who are skeptical that the U.S. financial crime syndicate engages in such long-term planning, simply read “The Bankers Manifesto of 1892” – where they described their plans, in detail.

Meanwhile, the job assigned to the lackeys in the U.S. government and the U.S. media are to lie and stall. The corporate propaganda-machine is doing its part (see “Bloomberg’s Sunday propaganda: U.S. housing has bottomed”). The talking-heads in the media generally proclaim a “bottom” in the U.S. housing market about once a month – at the least.

The actual “plan” to fix the U.S. housing market is very straightforward: demolish millions of excess homes to reduce inventories to a level where demand can eventually meet supply (see “U.S. banks bulldozing NEW homes”). When you are getting trillions of dollars in real estate for free, you can afford to destroy a couple of million homes.

Expect the puppets of the Obama regime to stall for a few more weeks, claiming that “the plan needs time to work”. By sometime this summer (after another million Americans have been thrown out into the streets), yet another “housing fix” will be announced (with a huge fanfare from media propagandists). This will be yet more empty promises, and this “circus” will continue.


Banks want Americans to lose their homes. They even explicitly promised this more than a century ago. And unlike most of what you read from the media today, that was a promise which you can actually believe.

(Reuters) – The U.S. Treasury Department on Tuesday said that 10 of the country’s banks including Morgan Stanley and JP Morgan Chase & Co were cleared to pay back a combined $68 billion in financial rescue funds.

If all the money is repaid by the banks, the government’s Troubled Asset Relief Program, or TARP, should have unallocated funds of about $122 billion.

The calculation is based on data from TARP’s special inspector general and assumes full funding of bank capital injections as well as for the government’s toxic asset purchase program.

Following is an outline of funds spent or pledged from the U.S. bailout fund so far:

– An unspecified amount pledged to recapitalize some of the country’s largest banks, if needed, in the wake of regulatory “stress tests.” Regulators required 10 of the 19 banks tested to raise a combined $74.6 billion. About $65 billion has been raised by these banks from private investors so far.

– The Treasury has allotted $100 billion to seed its public-private plan to buy up to $500 billion worth of toxic assets. The figure includes $25 billion to expand the Federal Reserve’s Term Asset-Backed Loan Facility, or TALF, to accept so-called legacy assets as collateral.

– The Treasury estimates that it will provide $218 billion in capital to banks under its original Capital Purchase Program, which was initially pegged at $250 billion. In its latest transaction report, covering the period June 3, the Treasury said it had net investments of $199.40 billion under this program.

– $50 billion pledged to reduce mortgage foreclosures by providing incentives to lenders and servicers to modify loans. It has allocated $15.17 billion in potential incentives to 15 firms so far and $10 billion for incentives to modify loans in the hardest-hit markets.

– $20 billion investment in Citigroup as part of a package in which the government agreed to share in losses on $301 billion of assets. In addition, the Treasury has disbursed $5 billion as part of its second-loss guarantee. The $20 billion is in addition to $25 billion disbursed as part of the Capital Purchase Program.

– $20 billion investment in Bank of America as part of a package in which the government agreed to share in losses on $118 billion of assets. In addition, the Treasury has pledged to cover up to $7.5 billion in potential losses as part of a second-loss guarantee. The $20 billion is in addition to $25 billion disbursed as part of the Capital Purchase Program.

– $69.835 billion preferred stock investment in troubled insurer American International Group. This was reduced by $165 million from an earlier commitment, representing the amount of controversial bonuses paid by AIG in March.

– $80.27 billion has been promised to prop up the U.S. auto industry, including bankruptcy financing and other loans to GM and Chrysler LLC, $5 billion in support for auto parts suppliers, and a $12.5 billion investment in GMAC LLC.

Of the total amount, the department said it made available up to $30.10 billion in bankruptcy financing for General Motors on June 3.


– $20 billion has been shifted to a special purpose vehicle to cover potential losses on $200 billion in lending under the Fed’s TALF. Treasury officials say they intend to provide an additional $35 billion to enlarge this program for lending against recently originated securities. When considered in conjunction with the $25 billion being set aside to expand TALF to cover older securities, the Treasury has said it intends to commit $80 billion to TALF.

– $15 billion pledged to purchase securities backed by Small Business Administration loans.

by LongTom
Mon May 25, 2009 at 06:08:17 AM PDT

Okay, I worked for Obama, voted for him, and support him. But his mortgage assistance plan is apparently smoke and mirrors horseshit. Or does anyone know differently?

* LongTom’s diary :: ::
*

Someone close to me qualifies pefectly for the “Making Home Affordable” Plan, whereby people current on their mortgage who have suffered a sudden drop in income, sudden unexpected expenses (like medical bills), are supposedly getting a temporarily refinanced mortgage to meet their new circumstances.


My friend’s experience has been that this is just another piece of deflective, pro-industry bullshit. She lost her job last October and has been eroding her savings to meet her mortgage payment. She’s never missed a payment on this house she bought 8 years ago. After going through the application process, she gets advice from the mortgage company like, “You have too much money in the bank to qualify.” (Ridiculous. She has a total of less than $10,000 to her name) and “Why don’t you try missing a couple of payments?”

On the government Web site touting these programs, it says: “This site can help you determine if you are eligible, but only the servicer of your loan can tell you if you qualify. To qualify, you will generally need to show that you have adequate income to make the reduced payments on an ongoing basis and that modification is an appropriate option given the characteristics of your mortgage and the value of your home.”

In other words: nobody gets it. Or am I wrong? Has Obama even released any figures as to how many people have gotten this refinancing? If this is how he handles health care, we’re fucked. Right now, I think he’s full of shit and that he does not know how to create a real social or economic assistance program that works. Anybody know anybody for whom this Making Home Affordable program has worked? Or what the stats are nationwide for how many people have “qualified?”

Tags: Obama, mortgage, social programs, failure (all tags) :: Previous Tag Versions