HAMP’s New Enhancements are Stupid and I’m Getting Tired of Stupid
Who’s the moron in the Obama Administration? Someone needs to find out and let me know so I can name names, because the monumentally tragic absurdity known as the Making Home Affordable program, or the Home Affordable Modification Program, or any of the other wonky acronyms this administration has come up with, just went from ill-conceived to stupid. It jumped the shark, in a manner of speaking.
This past week, the administration announced, again with much fanfare, that they would be announcing some fabulous improvements to the absolute failure that is HAMP, the government’s answer to the ongoing foreclosure crisis that continues to fuel the freefall in housing prices that assures our recession’s future.
So, once again I waited to see what the smartest guys in the room would come up with, again feeling like Charlie Brown eyeing that football, and thinking to myself: If you pull that thing away at the last moment again… Lucy, you got some ‘splainin’ to do. (When I think things to myself, I often sound like Desi Arnaz in my head.)
So, they made the announcement and I wrote an article about it and I tried hard not to be a unqualified naysayer. I don’t like bashing the Obama Administration all the time. I’m even willing to wait longer to see my doctor or pay a tax on my health insurance if they’ll just stop the bloodletting in the housing market before it turns Somalia into a better place to own a home than Southern California. That’s not unreasonable, is it?
But they did it again, damn it. The Harvard contingent that’s packed in like sardines in this administration once again demonstrated that they have no idea what they’re doing when it comes to the foreclosure crisis. Their best idea to-date, no actually their only idea to-date, is to continually release questionable-at-best, manipulated economic data to tell us that the recession is over, as we struggle to stay afloat hoping to not be laid off, and wondering how much we could save each month by growing our own tomatoes after our bankruptcy has been discharged.
Well, there’s that and the giving of trillions to the banksters in one form or another.
The “new and improved” HAMP advertised “principal reductions” and “more help for the unemployed,” as it relates to loan modifications, which made for a fabulous sound bite, and predictably led the tribe of sycophant journalists to write about how the new plan would help stop more people from falling into the abyss.
So, here it is Saturday morning. I got up, poured my coffee and sat down to read the language of the new HAMP more carefully, and now all I want to do is beat someone or something with a baseball bat… or go take a nap. Because, I have to tell you… I’m getting real tired of stupid, and this is really stupid.
The new and improved HAMP caused Moody’s Economy.com to release revised forecasts for the new plan, saying that it could prevent nearly 1.5 million foreclosures from now through 2012, compared with an estimated 650,000 forecasted under the old plan.
Am I the only one that finds that hysterical, in addition to being interminably sad, of course? I mean, none of the forecasts for the old HAMP have come anywhere near close to accurate, so now Moody’s releases forecasts based on those hippy-dippy numbers? And that’s not funny? In addition to being stupid, of course? I‘m sorry, but I’m laughing my ass off over here.
So, here’s what the new and improved HAMP will… and more importantly will not do for homeowners:
1. Help for the Unemployed – For distressed homeowners receiving unemployment benefits at the time they apply for a loan modification under HAMP, lenders are now supposed to lower their payments to no more than 31% of their gross income for three months… as long as the homeowner is not more than 90 days in arrears at that time.
Then, as if it mattered one iota, the unpaid amounts are to be added to the loan’s principal so they can be defaulted on… I mean repaid… at a later date.
It appears that the administration is hoping that three months later the unemployed homeowner will have found gainful employment and therefore will qualify for a normal HAMP loan modification in which payments will stay at some reduced amount. Of course, if the borrower doesn’t manage to find a new job in 90 days… and not just a new job mind you, but one that adequately replaces his or her lost income… we’re not talking “would you like fries with that”… well, then it’s foreclosure time at the family ranch once again.
Okay, everybody stop. Whose idea was this? Find him… test him to make sure he’s not mentally challenged due to a metal plate in his head or by some sort of birth defect… and assuming that’s not the case, punish him severely and publicly in order to dissuade others from engaging in this level of thinking in the future. Clearly, we need to raise the bar here, and allowing this sort of thing to slip by as being in any way acceptable for adults will only perpetuate a race to the bottom in the idea generation department. Next thing you know you’ll be taxing health insurance benefits… oh wait… never mind, bad example.
Let’s look at this component of the new plan…
First of all… and the administration knows this all too well… we have a record number of people in this country that are unemployed for more than 26 weeks, a near record number of part-time workers for economic reasons, and a decline in average hourly wages across the board. And that’s according to the government’s own most recent report.
So, let’s see… how many weeks in three months? Hmmm… carry the 7… divide by 9… I don’t know… shall we call it 12? I wonder how many of the unemployed homeowners applying for a loan modification will replace their income to the level required in 12 weeks or less? And since lenders and mortgage servicers won’t even talk to anyone about a loan modification until they’re 60 days delinquent, and the new plan only applies to homeowners that are less than 90 days delinquent… so that leaves what… a thirty-day window?
The administration’s new plan will only apply to unemployed homeowners in that 30-day window? Seriously? And then they’ll get a lower payment for 90 days and unless they find a new job that replaces their old one in that time, they’re back to foreclosure? Wonderful, that just sounds positively wonderful. Crackerjack work, wouldn’t you say?
Oh, and even in the best case scenario, the amounts that go unpaid get tacked onto the loan anyway? And just when do those get repaid? Come on… this is characterized as providing extra help for unemployed homeowners? Really?
This is extra help, like a Dr. Scholl’s footpad helps 40 years of wandering in the desert.
2. Consider Principal Reductions for Underwater Homeowners – For homeowners behind in their payments and considered “deeply underwater,” the new and improved HAMP will “require lenders and servicers that decide to participate to consider” providing a reduction in the principal balances of mortgages. They will also be “encouraged” to reduce principal balances for underwater homeowners who are current on their payments.
First of all, the word “consider” comes from the Latin word “considerare,” which means: “to look at closely, observe”. And the word “considerate” means: “marked by deliberation, of persons deliberate and prudent, and circa 1700, meaning “showing consideration for others”.
So, before I say anything else, I’d like to propose that we pass a new law immediately that prohibits the use of either word in conjunction with anything having to do with banks. All those in favor? Yep, I thought so.
Getting back to the specific issues at hand… weren’t the banks already required to “consider” principal reductions in conjunction with granting loan modifications under the HAMP guidelines. Oh yes they were… or rather are. Look up the HAMP guidelines, you’ll see.
So what’s the deal now? Are the banks now being double-dared to consider writing down the loans? Are they being told to think on it extra hard.
Why in the world, and especially at this stage of this tragedy, would our government even CONSIDER writing language like this into an already failed plan that’s continuing to publicly pull our nation’s economy towards an extended state of financial ruin?
And don’t even talk to me about banks being “encouraged” to write down mortgages for homeowners who are not delinquent on their mortgage payments, because not only do I not believe this will ever happen to any meaningful degree if at all, but I find the entire idea utterly preposterous. If you want to help those who are not (yet) delinquent on their mortgage payments, how about doing something to stop their neighbor’s home from being auctioned off at 60% of it’s market price. That might help, what do you think?
We certainly don’t need Bank of America devoting any of its obviously scarce resources to calling homeowners who aren’t delinquent and saying: “Hi, yes I’m calling from Bank of America. I realize you’re not delinquent on your mortgage payments, so we thought we’d give you a call and see if we can’t write down the principal balance for you.”
And all of this assumes that lenders and servicers will decide to participate in the first place, because like every other government program to-date, it’s all voluntary. The banks don’t have to do diddlysquat. And, as The New York Times pointed out in its editorial discussing the changes to HAMP:
“… lenders might wait to see if bigger incentives are offered later. They may also prefer foreclosure to modifications because the long foreclosure process lets them postpone taking losses.”
Both points are of course true, assuming that any lender’s internal discussions on the subject would even rise to the level at which either point might become relevant.
The administration must do more. They owe these homeowners… and the American people more.
There are quite a few people out there that feel that homeowners unable to make their mortgage payment deserve nothing more than foreclosure. Their thinking, in most instances, is that these homeowners have brought this on themselves and now it’s time to pay the proverbial piper. Their bad decisions have consequences and the government has no business “bailing them out”. Yada, yada, yada.
I could not disagree more with this perspective and it’s important for me to state precisely why I think the way I do.
A. This is not 2006, 2007, 2008 or even 2009. This is 2010. The government has had several years and two administrations to do something about our downward spiral in the housing market and it has unquestionably failed at every single turn. Meanwhile, our government has bailed out the Wall Street banksters whose actions were the proximate cause of the crisis. It wasn’t today’s homeowners who thought housing prices would go up forever, and as a result leveraged themselves 40:1, it was the bankers who thought that way and did just that as a result.
B. Sub-prime loans are not the issue, and haven’t been for well over a year, maybe two. Today, more than half of the foreclosures are prime loans, so it’s not about people who shouldn’t have qualified for buying their home. People losing their home today have simply been caught up in the deflationary collapse that’s been allowed to go on almost unchecked for far too long.
C. Had the government stepped in sooner and more effectively, and there were plenty of opportunities for it to do so, we wouldn’t have (U3) unemployment hovering around 10% with no relief in sight, so many of these homeowners wouldn’t be unemployed and losing their home as a result. (U6 unemployment, the real unemployment number, is still north of 17%)
D. Had the government stepped in sooner and more effectively… and had the banks not shattered the credit markets by pushing AAA rated mortgage backed securities whose value was questionable at best… housing prices wouldn’t have fallen as far as they have and therefore many more people would be able to refinance as their loans adjust higher instead of the situation in which we find ourselves today.
E. The government’s failure to more effectively address the housing crisis has caused values to fall to the point where every homeowner in America has sustained enormous losses, to the point where even the most prudent of plans have gone awry. Retirements are being postponed, and all Americans are paying the price. Taking effective measures at this point to stop the carnage in the housing markets doesn’t represent a special interest bailout of irresponsible homeowners, it represents the only responsible path the government can possibly take to assure the future prosperity of its citizens and nation as a whole.
Hopefully, that made my position sufficiently clear.
This new and improved HAMP for the unemployed is not going to help 1.5 million homeowners instead of 650,000, as forecasted by Moody’s. In fact, with HAMP itself still languishing somewhere between total failure and abysmal failure, in terms of its ability to help homeowners who are not unemployed, I’d be surprised if it helps anyone at all.
And the idea that anyone could possibly peg their hopes on banks “considering” anything, or acting in anyone’s best interests but their own, based on any level of encouragement, first makes me laugh… and then pity those willing to do so.
The entire idea is absurd, and whoever is responsible for authoring such enhancements to the HAMP program, deserves to be publicly ridiculed. They are obviously people whose intelligence is lacking to such a degree that they should not be allowed to drive a car, or even cross busy streets without assistance.
Here’s a thought… Perhaps the whole thing is just part of Obama’s plan to stop immigrants from coming into this country illegally by allowing the United States to become a nation whose economy provides less opportunity for prosperity than Mexico. ‘Cause you know… that just might work.
If that’s the case, however, then I’d like to reverse my position on the whole “build a fence” idea. Capisce?