Bloomberg (News): Obama Shoulda Made HAMP, HARP Bigger

President Obama's two programs to keep mortgage borrowers in mortgaged homes have failed, but post-mortems from the mainstream media refuse to say why. Instead, whole books have treated the programs' execution, without considering the possibility that the Home Affordable Modification Program (HAMP) and Home Affordable Refinance Program (HARP) failed because they were designed to do the impossible. 

Bloomberg's Clea Benson takes the wayback machine to 2009, and reveals that the HA'Ps did not, as advertised, avert 9 million foreclosures, support home prices in most states or budge the percentage of underwater borrowers, which remains stubborn at 23 percent. CoreLogic examines its most recent data and finds

that 11.1 million, or 22.8 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2011. This is up from 10.7 million properties, 22.1 percent, in the third quarter of 2011. An additional 2.5 million borrowers had less than five percent equity, referred to as near-negative equity, in the fourth quarter. Together, negative equity and near-negative equity mortgages accounted for 27.8 percent of all residential properties with a mortgage nationwide in the fourth quarter, up from 27.1 in the previous quarter. Nationally, the total mortgage debt outstanding on properties in negative equity increased from $2.7 trillion in the third quarter to $2.8 trillion in the fourth quarter.

Several of these numbers are unchanged from 2009, when the Obama Treasury Department deployed its $75 billion Homeowner Affordability and Stability Plan (HASP), which encompasses HAMP, HARP and Home Affordable Foreclosure Alternatives (HAFA). 

Benson puts a brave face on the lifeless performance of government loan modification, for example by repeating the administration's vague claim of having "reached" [pdf] more than 2 million borrowers. But Treasury admits [pdf] that just under 600,000 loan mods have been canceled, and 20 percent of successful modifications end up back in default. 

The Office of the Comptroller of the Currency is behind schedule in releasing the first quarter 2012 Mortgage Metrics Report, but here's my own finding about the most recent report: 

As you can see from the latest OCC/OTS Mortgage Metrics Report [pdf], modifying loans continues to do what it did in 2009, 2010, 2011 and earlier this year – drag out the pain of mortgage default without doing much to keep bad borrowers in the homes they don't want to pay for. Redefaults (starting at page 34) are ticking back up across all categories. That goes for both voluntary modifications and loans modified under the Home Affordable Modification Program (HAMP). 

One bright spot for the government is that the redefault rates for HAMP and HARP loan mods are lower than the redefault rate for all loan mods. (Disclosure: I am currently in paperwork turnaround trying to refinance my home under HARP.) 

Benson tells us what went wrong: 

While his plan was undermined in part by the weak U.S. economic recovery, it also lacked broad and aggressive measures. 

Other than a to-be-sure from George Mason University Prof. Anthony B. Sanders, the rest of the article describes how HASP, like all stimulus, would have worked if it had only been big enough. 

Benson's diagnosis is a trove of governed-economy chestnuts: 

The Consumer Financial Protection Bureau, for example, hasn't yet defined which mortgages are considered consumer-friendly and which are considered abusive. 

Benson blames banks for raising their standards: 

Uncertain about their liability for vetting borrowers, lenders have raised credit standards to new highs, shutting out some would-be buyers of distressed properties. 

And Benson recalls one thing worth remembering: that HAMP has spent only a small fraction of its total earmark: 

Obama pledged to use $50 billion from the $700 billion bank bailout approved by Congress in 2008 to help homeowners. Only about $3.7 billion of that has been spent.

That's good news. Since 2007, the Fed-Treasury axis has been trying to prop up of house prices. Now HousingWire asks whether that goal might be achieved through negative equity. When that fails, the tool of choice will be mortgage cramdowns using taxpayer money. "Most importantly, every place we can responsibly do something to help homeowners and help heal the market, we're going to take those steps," says Special Economic Assistant Brian Deese, who assists the president in economic matters. 

Benson's post-mortem contains other morsels and is a good cheat sheet to the summer real estate slaughter. In Marxist term, Bloomberg and other news institutions are treating the superstructure while ignoring the base, but worse pieces have been written about the HA*Ps. 

Comments

[Bill]

Could use a re-write to make it more interesting and understandable. Also, try to make it more mean spirited or sarcastic or something ......

[SIV]

(Disclosure: I am currently in paperwork turnaround trying to refinance my home under HARP.)

fixed

[Palin's Buttplug]

That would make Cavanaugh a ward of the state then.

I see his Obama hatred now - HARP is not big enough.

[Tim Cavanaugh]

The real crime against the 99% is that they called me up with a HARP refi even though I'm $235,000 above water (per Zillow). And it's a zero-sum universe. So some needy deadbeat won't get a principal cramdown while I get an artificially low interest rate and Wells Fargo gets a bonus from the government for "reaching" me. That's exactly the same as taking gold fillings out of the teeth of death camp victims.

[Tim Cavanaugh]

Also, Geithner gets to count me as one of the millions of homeowners who have been assisted by the American Recovery and Reinvestment Act. Someday I'll be in a treasury.gov pdf. If you look real close I'll try to wave.

[Sevo]

If it's none of my business, you can say so.
But with re-fi mortgage interest near (effective) zero, why would you get the government involved?

[SIV]

They won't re-fi if you don't have equity. Wells Fargo learned their lesson about making bad housing loans not fully backstopped by Uncle Sugar

[Byron]

DIAF, Cavanaugh. You could just say, "No."

[generic Brand]

Are you going through the program on your own or are you using a 3rd party facilitator?

[Gojira]

I work directly with these programs every day while conducting foreclosures for a major bank, and it is the single biggest pain in the ass I have ever experienced. Warty injecting me with his tubesteak is preferable to dealing with these damned things.

And the cost! Our staff dealing with loss mit has had to quintuple to keep up with the gov't mandated programs, and it slows the foreclosure process to a crawl, all while doing nothing but costing people more late fees, legal charges, and extra months of bad credit reporting. You really have no idea how big a nightmare regulatory compliance has become.

And it isn't just the feds. The states are just as bad about it (most of them, at least). And on top of their bullshit programs, they demand that we go through all the federal stuff first, THEN do their state deals (mandatory mediations, extra notices, etc.)

On the upside: job security.

[Mad Scientist]

But, but they meant well!

[Brutus]

Maybe this is the intent, Gojira, to keep as many houses out of foreclosure as possible to make the market look good, at least until the election.

[generic Brand]

I work on the opposite side for a law firm that defends foreclosures and assists with the loss mitigation process to get the modification. Every day is a roller coaster ride as to whether I side more with the banks for foreclosing on deadbeats or our clients for trying to keep the home.

side with = who I think is more in the right

[LibertyWolf]

If you really wanted to help HAMP, get these people to send in their freakin' docs. Jeezus, you'd think if you want to save your house you'd send shit in, but no. They just mozy along for the 45-day period and bitch after they get declined.

[Rasilio]

Or you know, maybe the banks should stop loosing the docs.

Right now I'm in the middle of trying to do a deed in leiu. I lost my IT job in the midwest and realized that there was absolutely no chance of my getting a replacement paying more than $15,000 a year less than I had been making, enough of a pay cut that it would have been a pretty quick road to bankruptcy as it would not have left me enough income to meet my fixed cost living expenses forget handle anything irregular or unexpected. So I found a job out of town and moved. Now the house was probably not technically under water, given a year or two I could probably have sold it for the $220K I owed on it, problem is that would not have covered closing costs, I'd have had to pay them out of pocket, and I didn't have a year or two, I had 3 months notice that I was moving, now the house is vacant and I'm 1000 miles away and I can't afford rent + mortgage + paying someone to maintain the property in the hopes that it sells then to pay $15,000 out of pocket just for the privledge of getting rid of it and that is the best case scenario.

So I called the bank and asked what I needed to do to turn the property over to them.

[Rasilio]

So far they have lost documentation on us 4 times, completely blew off at least 6 scheduled calls and essentially do not seem to be interested in taking over the property when all I'm trying to do is save them the cost of the legal fees to foreclose and give them the chance to sell the property sooner before someone breaks in and tears it apart for the copper.

[Hugh Akston]

HAARP should have been bigger. That Indonesian tsunami barely killed any mooselimbs at all.

[WarrenT]

Off topic: Hamilton Nolan of Gawker thinks a fast food union will be all kinds of great. Of course his econ challenged readers go along with it.

Note: this link is to an article today kvetching about anti-worker restaurants. At the bottom you can go his McUnion article.

Despite the easily available evidence some people just cannot fucking learn why unions are crap.

http://gawker.com/5918072/a-gu.....or-workers

[MP]

If there were no special legal framework related to union organizations, then how exactly are they "crap"?

Private sector unions have a legitimate role in a free market. They may all eventually suffer from cartel failure, and they may exorbitantly enrich their leaders, but they are not fundamentally flawed.

[WarrenT]

I mean how unions legally work in this country. Not the idea of individuals joining together and acting non-coercively to achieve a goal.

[SIV]

Flawed

I doubt dues will be collected from their social welfare benefits.

[Sevo]

"Private sector unions have a legitimate role in a free market. They may all eventually suffer from cartel failure,"

Uh, unions START as cartels.

[ant1sthenes]

He doesn't eat fast food, and he probably despises those that do, so why should he care if their food costs go up and their service gets shittier?

[WWNGD?]

I had to watch a lot of Bloomberg after the election. I would laugh because the Bloomberg anchors would get love sick when Obama made an administration announcement and the stock market rose. "The stock market is obviously reacting positively to Obama's choices for his administration.
However if the stock market fell after an announcement they didn't say the market was reacting poorly to the news.

I wondered how many people fell for the positive news line.

[Tulpa the White]

Speaking of Bloomberg: the journal that brought you the autism-vaccine scare goes to bat for nanny state health policies:

While life expectancy in many parts of the United States is dropping, it has increased by 10 years in Manhattan since 1987.

Lead researcher Ali Mokdad said the reduction is largely thanks to aggressive efforts by city health officials to simply take away unhealthy choices from residents. The health department has, for example, banned trans fats, prohibited smoking in public spaces and hiked taxes on cigarettes. It has also rolled out hundreds of miles of new bicycle lanes, mandated the use of calorie labels on menus in chain restaurants and plastered posters up in subways with information about the risks of obesity and the benefits of preventive health services.

"For way too long, public health departments have defined their responsibilities as essentially infectious- disease control rather than improvement of health of the population," New York City Health Commissioner Thomas Farley told The Lancet. In 21st-century New York, the real concerns are tobacco, poor nutrition and inactivity, so the health department has made them their new focus, he said. "It's not a given that we're going to continue to have high rates of smoking and high rates of [noncommunicable] diseases; those are as preventable as infectious diseases were 150 years ago."

[Tulpa the White]

So remember two things, people:

1. Eating badly while young will lead to a lifetime of bad heart health, and

2. A trans fat ban can reduce heart disease deaths in middle aged people in less than three years.

[Butts Wagner]

Ali Mokdad: "Solved!"

[Sevo]

"2. A trans fat ban can reduce heart disease deaths in middle aged people in less than three years."

Not to mention bicycle paths! Why Pelosi brought home the pork for bicycle paths three or four years ago, and I'm already going to live another 50 years!
Those poor bikers who get flattened running stop signs? Well....

[SIV]

Gentrification pushing the heroin markets to outer boroughs had absolutely nothing to do with it.Or maybe it did? They should try it in Camden.

[Fongotang]

Gotta love them bought and paid for politicians.

http://www.Anon-Plans.tk

[jason]

This fan finally exicst in the alabama.

[Mollyg]

Part of the reason that HARP and HAMP have failed is that the banks have put up random barriers to them. For example, Wells Fargo has declared that they will not process any HARP Same Servicer refinances for loans that they did not originate. Given that it is common for banks to sell mortgages to each other without the consent of the borrower, this hurts people due to no fault of their own.

It is mind boggling that a bank will go out of their way to block their own customers from valuable government programs. This is only one example. No wonder the programs have failed.