Back in 2009, Obama’s administration introduced a program to keep 4 million homeowners from foreclosing on their homes.
Six years later, the Home Affordable Modification Program has been proven to be unsuccessful with only accepting a small fraction of homeowners. 1.6 million borrowers saw a decrease in their mortgage payments through the program. However, a third of these individuals are behind on their payments again.
This Friday, the program has accepted its final applications and will expire in September 2017.
Obama promised to give millions a chance to “rebuilt.”
“It will give millions of families resigned to financial ruin a chance to rebuild,” said Obama in 2009. “By bringing down the foreclosure rate, it will help shore up housing prices for everyone.”
As we now know, this goal was much too lofty.
“The president set out an ambitious goal that wasn’t met,” said Kevin Stein, deputy director of the California Reinvestment Coalition, a housing advocacy group. “It was definitely a step forward and step in the right direction, but it didn’t [reach its goal] and a lot of people ended up falling through the cracks.”
Out of the 4 million promised, only less than a million were actually accepted and offered assistance. But, ultimately, the program proved to just prolong the foreclosures.
Not to mention, Obama was already given Congress’ approval to act prior to even entering office. He should have hit the ground running.
“Obama’s transition team earmarked up to $100 billion in funds appropriated through Bush’s bank bailout to mitigate foreclosures; eight years later only around $21 billion has been spent,” writes The Atlantic.
But, wait there’s more. Obama’s administration made another huge mistake by working with companies that always saw foreclosures as the end game.
“The Treasury Department alone decided to run it through mortgage companies that had financial incentives to foreclose rather than modify loans. Treasury never saw the program as a relief vehicle, but a way to “foam the runway” for the banks, allowing them to absorb inevitable foreclosures more slowly. Homeowners were the foam being crushed by a jumbo jet in that scenario, squeezed for as many payments as possible before ultimately losing their homes.” writes The Atlantic. “Worst of all, most of these foreclosures were executed fraudulently. Banks neglected centuries-old property records laws, and used millions of forged and fabricated documents as evidence in courtrooms and county offices to paper over their mistakes. When this came to light in fall 2010, the leading mortgage companies stopped foreclosing because they could no longer do so legally. “
Those who commuted fraud were not prosecuted and the banks got just a slap on the wrist with bank settlements. Many banks took advantage of the program.
“Many of these banks have repeatedly broken the rules of the program, including kicking homeowners out unfairly or making it too difficult to apply for the help, according to the agency,” writes The Washington Post.
Banks were again not given enough consequences.
“The Treasury Department didn’t act quickly enough to force banks to abide by the rules of the program, housing advocates have said. Nearly 70 percent of the homeowners who applied for the program were rejected,” writes The Washington Post.
Banks, instead will be given incentive payments over the next seven years.
“Banks will continue to receive billions in incentive payments for helping borrowers who signed up for HAMP for seven years. Wells Fargo, which has received $1.8 billion through the program, is eligible for up to $1.5 billion in bailout funds over the next seven years, for example. JPMorgan and Bank of America, which have received $1.9 billion and $1.4 billion respectively, could receive about $1 billion each over the next few years,” writes The Washington post.
The Treasury Department defends the program saying it “changed how mortgage servicers handled homeowners in distress; not only by developing a template for loan modifications focused on affordability but also by creating and enforcing standards of care that have been widely adopted by the entire industry.”
However, the housing crisis is still very much an issue in many packets across the country.
The frustration with how the current administration has been handling the foreclosure crisis help Trump get elected.
“National Public Radio found two such homeowners, retirees who lost their home in 2011 after taking on a home-equity loan they could not afford. Like many caught in the forest of post-crisis foreclosure bureaucracy, the couple couldn’t maintain connect with anyone at the bank to restructure their loan, and saw their house sold without warning,” writes Quartz. “Dismayed with their treatment by the system, they voted for Trump in the 2016 election. A new analysis shows they are far from the only people bearing the scars of the housing market who backed the real estate developer’s run to the White House.”
Americans who have been impacted by this failing system are hopeful that Trump’s business background can help him pull the country out of this crisis.
January can’t come soon enough. Obama never truly understood the problem, then he helped develop a pathetic solution to bail out individuals who never even had a chance of keeping their homes because they couldn’t afford them.
“This past year has made clear that America’s social fabric is fragile. When you let private companies distort a government program into a foreclosure-creating machine, when you allow the largest consumer fraud in American history to occur without sanction, you tear at that social fabric. You create a rot at the heart of American democracy. You teach the public the rules don’t apply to the wealthy and powerful,” writes The Atlantic.
Editor’s note: The original Community Reinvestment Act that cause the mortgage crisis was a law with a socialist flavor that did what all socialist efforts do. It collapsed in on itself. Obama’s followup effort has done the same thing. Perhaps we can learn a lesson from this?