HAMP, HARP, HOP, HOOP… Like Watching Someone Spend $10 Trying to Fly to the Moon

The Washington Post, with Bloomberg, just did what I had been thinking about doing for quite some time, but frankly was just plain afraid to do.

They contacted the Treasury Department, the Department of Housing and Urban Development and the Federal Housing Finance Agency to ascertain just how the Obama Administration’s housing rescue programs were doing to-date… in terms of their impact and cost.

I thought about doing the same thing about three months ago, but since it had about the same appeal as scheduling a colonoscopy, I somehow managed to stay just a little too busy to get to it.  Once I got close to having time, but luckily my sock drawer needed rearranging, so that took care of that.

The Post’s post didn’t even have an attributed author at the top, which made total sense to me… I wouldn’t have wanted to attach my name to it either.  And check out how the story kicked off…

The Obama administration has taken several stabs at stemming foreclosures and reviving the housing market.  Here is a look at some of the administration’s largest programs:

You know, that sentence alone explained a lot to me, actually.  And I’m not quite as disappointed in the president as I was before I read it.  He only “took a stab” or maybe a couple of three stabs at “stemming foreclosures and reviving the housing market.”  So, okay then… he wasn’t really trying… it wasn’t a major effort on which he was concentrating… he just took a stab… like maybe he came up with stuff to try during a commercial break while watching American Idol with his girls, or something like that.

Boy, that sure is a relief, wouldn’t you say?  Because, see… I had been under the impression that he had actually been trying to do something big and important and was putting his best foot forward, as it were.  And if that were the case, well… then he’d be an incompetent loser with the vision of a Star-nosed Mole.  But since he wasn’t really trying… rather he was merely “taking a stab,” well, that just makes him a careless moron for fiddling while Rome burned.

See, I like him a lot more now that I know that, don’t you?

His bien-pensance, it should go without saying, is HAMP, the Home Affordable Modification Program, and we all know what a rousing success that has been.  Sheer-joy-on-a-stick is how I hear most homeowners referring to it.

It was originally slated to help up to 7 million, but according to the Post, has come up just a tad short at right around 600,000.  I’ve seen some say that number is 700,000, but I don’t want to split hairs… after all, what difference does 100,000 homeowners make anyway?  It’s an insignificant number, really.

The Post puts the budgeted price tag for the entire Making Home Affordable program at $30 billion, with the money coming out of the TARP funds, and HAMP was to be the lion’s share of that amount.

Now, I’m not trying to be a stickler here, but if you remember back to 2009… I know it’s hard, but try… you might recall budgets for HAMP that were closer to $80 billion, but obviously the administration is counting on no one remembering that far back, so put it out of your mind and move along… there’s nothing to see here.

To-date, the program has cost roughly $1.42 billion.  And to put that number in perspective, I looked it up and the government spends $20 billion a year to air condition tents in Iraq and Afghanistan.  So, if that same math holds up… that means that instead of helping only 600,000 homeowners in this country, we would have had the money to help roughly 8.5 million homeowners avoid foreclosure had we simply invaded cooler countries.

Are you with me on that calculation?  If not, see me after class.

Next up is HARP, the Home Affordable Refinance Program that rhymes with TARP, but that stands for FOOL (and if you remember Robert Preston in The Music Man, that was funny.)

HARP allowed homeowners with Fannie or Freddie loans underwater at first by 115%, and later as we chased the housing market down the drain, by 125%, to refinance into lower interest rate mortgages.  Roughly 800,000 homeowners refinanced under the program so far, but again the program was originally forecasted to help millions.  It doesn’t really matter, however, as these were the 800,000 homeowners that didn’t need help, and had nothing to do with the foreclosure crisis.

Here’s what the Post’s article had to say about HARP’s cost:

“The Federal Housing Finance Agency, which regulates Fannie and Freddie, does not assign a specific cost to the program and agency officials say the program likely saves the firms money by keeping some borrowers out of delinquency.”

Alrighty then… what else do we have here…

Next there was the Emergency Homeowners Loan Program… or, EHLP.  This is that brilliantly conceived homeowner assistance program that seeks to help unemployed homeowners by loaning them up to $50,000 over a two-year period, and then if the homeowner stays current on their mortgage payments for five years, the loan is forgiven.

Should you have the unfortunate experience of losing your job twice in five years, however, the program socks you with the $50k debt and probably repossesses your car when you fall behind on your loan.

Congress allocated $1 billion to this stunning piece of thinking, saying that the program could help up to 30,000 borrowers.  Help them what, I wonder?  Help them get closer to bankruptcy, perhaps, but I wonder if the government loan can be discharged or whether it’s like one of them student loans that never goes away.  It’s a lot like the gift that keeps on giving… emotional baggage.

The Post failed to mention just how many borrowers the program had helped to-date… probably just an oversight, I’m sure.  I’ll take a guess though… you know, in an effort to fill in the blanks… I’m going to say the program has helped… hmmm… let’s see… umm… NONE.

But, don’t worry… today is July 19th and according to the Post, borrowers have until July 22nd to apply… so with three days to go, I’d say it’s too early to call this one a complete failure… maybe there’ll be a last minute rush to get in.  What?  It could happen.

And last up in the Post piece was the Hardest Hit Fund, which provided at first the five… then the nine… and then I believe, ultimately the 33 states hardest hit by the foreclosure crisis with a grand total of $7.6 billion.  Each state’s housing finance agency was charged with designing its own solution to the fast spreading and deepening housing meltdown.

Now, the states have until 2017 to use the funds, so the Post points out that “it’s early,” presumably, to judge the program.  Apparently, about70% of the state programs established assistance programs for unemployed workers, while 20% designed programs that would supposedly reduce the principal balance of underwater homeowners.

To-date, only $480 million has been spent, and other than providing hand-outs to the unemployed for a while… I can pretty much assure you that the rest of the money is safe, as I haven’t been able to find a single state program that’s helping anyone to ay degree.

When Arizona launched it’s homeowner assistance program last year, I made fun of it, and said that it wouldn’t help a single Arizona homeowner, so wasn’t I surprised when a year later, the Arizona housing authority announced quietly that the program had in fact helped one homeowner all year.

I didn’t hide from it though… I came right out and admitted that I had been wrong… and then apologized.  I still don’t know how I could have missed it by that much.

So, that’s it and that’s all… that’s Obama taking a stab… yeah… man.  You go Mr. president… keep on stabbing… you’re a stabbin’ fool, sir.

Well, like I said… at least he wasn’t really trying.

I feel like I’ve been watching someone spend the better part of ten bucks… trying to get to the moon.

Nice work, sir.

We’ll let you go back to bed now, sir.

Mandelman out.

Comments

  1. dolphnmike says

    Martin,
    I have a different take on the programs you have pilloried here.
    Specifically with the generalized (not just by you) characterization of the success of the HAMP program. By examining and making a conclusion based solely on the number of homeowners actively in a HAMP modification I think you are short-selling the overall effect of the program.
    Servicers are routinely putting people into modifications (albeit not enough or fast enough) that mirror HAMP workouts. I personally believe that is the case specifically BECAUSE of the HAMP option. Why else would they mirror the terms and workouts? Certainly it wouldn't be because they are voluntarily complying with the PSAs....if only 7-10% are actually in HAMP, then the body of modifications has to be examined, and those that have identical term should be considered at the very least as alternatives influenced by the program that servicers chose to avail themselves of as an alternate to the strings attached to HAMP monies specifically don't you think?
    As a student of public policy I think this has been a more effective program than the surface numbers imply. A parallel would be (in an unrelated industry) the fact that in every state you can get your car insurance through the state government itself, (they put you in a policy at a full/retail rate with a licensed insurer) but unless you have a DUI etc. then most people shop and go through an insurer that offers a discount to varying degrees. Simply put, they pay less to get the same thing, the insurer makes less but gets more people. This is a pattern where states and governments create a baseline alternative and the private industry either mirrors or exceeds the opportunity for consumers or themselves to benefit. If 90% of those that get modified get the same workouts as HAMP without the back-end support that HAMP offers the servicer, then the end result to the distressed borrower is the same, and the only net difference is to the servicer....unless I'm missing something, isn't that the goal of the program in the first place?? And isn't that actually a more economical way for the government to affect the desired result-modifications?

  2. mandelman says

    dolphnmike...

    Yes, I do agree with you analysis, and I have written about it on a couple of occasions. Here's one:

    http://mandelman.ml-implode.com/2011/01/republicans-preparing-to-play-politics-with-hamp/

    Here's another...

    http://mandelman.ml-implode.com/2011/02/is-hamp-poised-to-improve-in-year-3/

    I know there were others as well, but I can't recall which ones at the moment. Let me ask you a question... Would you be interested in doing a Guest Post on this subject? I think it would be important and would be happy to publish it. Let me know...

    Mandelman

  3. dolphnmike says

    Hello Martin,

    I would be happy to post any sort of guest posting!!!
    Let me know what you have in mind etc. and we'll go from there...my email address is in my profile...
    Mike

  4. mandelman says

    How do I find your profile?

  5. buyerbeware says

    dolphnmike wrote:
    Martin,
    I have a different take on the programs you have pilloried here.
    Specifically with the generalized (not just by you) characterization of the success of the HAMP program. By examining and making a conclusion based solely on the number of homeowners actively in a HAMP modification I think you are short-selling the overall effect of the program.
    Servicers are routinely putting people into modifications (albeit not enough or fast enough) that mirror HAMP workouts. I personally believe that is the case specifically BECAUSE of the HAMP option. Why else would they mirror the terms and workouts? Certainly it wouldn't be because they are voluntarily complying with the ...if only 7-10% are actually in HAMP, then the body of modifications has to be examined, and those that have identical term should be considered at the very least as alternatives influenced by the program that servicers chose to avail themselves of as an alternate to the strings attached to HAMP monies specifically don't you think?
    As a student of public policy I think this has been a more effective program than the surface numbers imply. A parallel would be (in an unrelated industry) the fact that in every state you can get your car insurance through the state government itself, (they put you in a policy at a full/retail rate with a licensed insurer) but unless you have a DUI etc. then most people shop and go through an insurer that offers a discount to varying degrees. Simply put, they pay less to get the same thing, the insurer makes less but gets more people. This is a pattern where states and governments create a baseline alternative and the private industry either mirrors or exceeds the opportunity for consumers or themselves to benefit. If 90% of those that get modified get the same workouts as HAMP without the back-end support that HAMP offers the servicer, then the end result to the distressed borrower is the same, and the only net difference is to the ...unless I'm missing something, isn't that the goal of the program in the first place?? And isn't that actually a more economical way for the government to affect the desired result-modifications?


    Good post!! You are correct, speaking from my own experience. Some banks do rely on HAMP guidelines to inform their mods. At least the guidelines help as a benchmark for modifications that are not true HAMP mods.

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