If you guessed it is Afghanistan, you are wrong. It is actually HAMP (Homeowners Affordable Mortgage Program), the Obama administration's program for rescuing underwater homeowners. Standing in for Rachel Maddow last week, Chris Hayes did a story on HAMP - how it actually hurts more homeowners than helping them.
Chris Hayes starts with a very nice explanation of what it means to be an "underwater" homeowner and the options for such people , using a mask & a snorkel.
http://www.youtube.com/...
HAYES: The last time I was on the show, three weeks ago, I spoke about people who owe more money on their home than it‘s worth, which is called being underwater. That‘s why I‘m wearing the snorkel mask there.
Those people who are underwater are more or less the people HAMP is designed to help. There are three ways it promises to do so. First, it gets lenders to lower the interest rate which is fine, but it only means you‘re still paying interest on a loan that is too big which is like handing the homeowner some scuba gear. You can breathe but you‘re still underwater.
Second way is by extending the term of the loan which is like giving a homeowner a snorkel. You can stay underwater longer and longer and longer, but eventually you need to come up for air and live your life.
And third, the program can reduce the principal of the loan, which is actually like pulling a homeowner up and out of the water and on to dry land. The problem, because the administration has put no requirements on what the banks need to do, most of the modifications aren‘t reducing the principal. That‘s optional.
And banks are opting out because they‘re already raking in big bucks and see no need to write down big chunks of loans on overvalued homes. But it‘s not just that HAMP is not solving the problem. It‘s actively making it worse.
And the result :
According to "Huffington Post‘s" business reporter, Shahien Nasiripour, more homeowners have been bounced from HAMP than have received permanent relief. Last month, analysts at Fitch Ratings projected that as many as 75 percent of HAMP modifications will ultimately result in re-default despite the lower monthly payments. If you talk to anyone who has actually interfaced with the program, you‘re likely to hear horror stories about a bureaucratic nightmare in which they were forced to jump through hoops that never actually resulted in much real help.
So it is all carrots for the lenders in the form of dole from taxpayers, and no sticks - ie. no accountability. All this while Obama was crowing about teacher accountability last week (it is not the first time) in return for aid to states for saving teacher's jobs. As if teachers crashed the economy and caused the public to loose homes, jobs & savings or caused a massive oil spill or resorted to torture. See the pattern here?
Worse yet, there are modification programs by private lenders outside HAMP showing mixed results but more succesful than HAMP. (h/t dday at FDL)
http://www.usatoday.com/...
So, somebody please explain me. The admin implements a program counting on "self regulation" by banks/lenders which is seemingly guaranteed to fail. While some watered down private programs show better results. Isn't that something only Republicans will do - implementing programs which will give government a bad name? Am I missing something here?
Actually, there are some sensible ideas to help homeowners out there with no cost to taxpayers. One such proposal is by Dean Baker which allows homeowners to stay as renters (endorsed by Simon Johnson , with similar proposals from Felix Salmon:
http://www.cepr.net/...
Dean Baker is one of those competent economists who warned about the housing bubble. Too bad Obama hasn't chosen any such person (or the likes of Krugman, Stiglitz, Simon Johnson for key advisors) and has signed on to the Clinton/Bush wrecking crew which brought us this economic hubris. With all due respect to Van Jones, Obama can't steer the Titanic away from the iceberg with the same wrecking crew which steered the ship into it in the first place. It is more like Obama is re-arranging the chairs on the deck of the Titanic. The sooner he realizes and replaces his crew with competent people & change course, the better it is for us and his own presidency. It is trickle up, bottom up economics, rather than the trickle down , "HORSE & SPARROW " economics.To use the home metaphor, he inherited a house badly in need of repairs. But while he is giving it some makeover on the surface (like clean energy investments, student loan reform etc), he is further wrecking the already shaky foundation. Botox economics only goes so far and can't hide the rotten core forever.
Hayes ends his piece with this knockout punch :
The White House often argues that its policy failures are the result of obstructionist Republicans or a noncompliant Congress. But they can‘t lay this at the feet of anyone but themselves. They appropriated $50 billion to administer the HAMP program, so this is totally on them. And rather than helping homeowners, what they have done is throw them to the tender mercies of the banks.
Barack Obama famously got his start as a community organizer on the south side of Chicago, an area that has been decimated by foreclosures. If the 25-year-old Barack Obama were around to see this, I think he would be disgusted.