Obama's Anti-Foreclosure Program Failing

As expected, the major banks have refused to play nice in reducing mortgage foreclosures. Now the Treasury plans to compel them to do so, in part by publicly shaming them into rewriting more mortgages and at more favorable terms. Yeah, good luck with that.

Back when the Making Homes Affordable program was first announced, critics said it was too little, too late, and that the voluntary participation structure for the banks would seriously undermine their willingness to cooperate. And now we find that less than 1/2 of 1% of 500,000 loan modifications (2,000) have been made permanent for troubled borrowers. The likelihood that the program will reach even half its goal of 3-4M struggling homeowners is slim.

Beyond the lack of incentives for banks to participate in Making Homes Affordable, the types of modifications offered seemed insufficient. For people who overpaid for homes worth a fraction of their original cost, stretching out a grossly inflated mortgage just isn't that helpful. We needed to reduce some of these mortgages outright; no surprise, that idea was politically d.o.a.

So now the Administration is scrambling and boasting and threatening, trying to restart a program that sputtered out of the gate. At this point, the problem behind foreclosure is widespread unemployment. That's where we need a workable solution - around which we can design effective foreclosure and eviction prevention programs.

(Photo by kevindooley)