Help Homeowners

It’s really hard to not read reports about HAMP and its failures and not get really mad. Government should work for people. It should make peoples’ lives better. It should serve as a defense for the defenseless. But what we’ve seen instead under HAMP is a prioritization of bank balance sheets over American homeowners. It’s maddening. In the last 24 hours, I’ve read about how hard it is for Americans in underwater homes to make a decision to walk away. I’ve also read that, not surprisingly, banks have buried people in paperwork as a means of making permanent loan modification a near-impossibility: less than 20% of those who applied for a trial modification went through and got a permanent modification. Alan White of Public Citizen writes:

Most of those who fail initially or at the conversion stage are not failing because their cases are hopeless. On the contrary, many are rejected for reasons that suggest workouts are possible (such as those whose debt ratio is not high enough for HAMP.) The program suffers seriously from lack of enforcement, from needlessly detailed and prescriptive rules, and from the Administration’s unwillingness to confront the principal reduction issue.

On the last point, ProPublica is out with a report today that covers the history of opportunities for cramdown to become policy and how it was rejected by the administration at every turn.

“We would propose that this stuff be included and they kept punting,” said former Rep. Jim Marshall, a moderate Democrat from Georgia who had worked to sway other members of the moderate Blue Dog caucus on the issue.

“We got the impression this was an issue [the White House] would not go to the mat for as they did with health care reform,” said Bill Hampel, chief economist for the Credit Union National Association, which opposed cramdown and participated in Senate negotiations on the issue.

Privately, administration officials were ambivalent about the idea. At a Democratic caucus meeting weeks before the House voted on a bill that included cramdown, Treasury Secretary Tim Geithner “was really dismissive as to the utility of it,” said Rep. Lofgren.

Larry Summers, then the president’s chief economic adviser, also expressed doubts in private meetings, she said. “He was not supportive of this.”

The absence of a policy solution to tens of millions of homeowners being underwater results in pain and suffering, not to mention a huge weight on the economy.

I’d really like to be able to go a day without reading a story about the fraudclosure crisis or HAMP or bankster profits that made me want to pull my hair out, but I doubt that is going to happen any time soon.

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