Jordan: New Mortgage Protection Plan Misses the Mark

• By Rep. Jim Jordan
• Special to Roll Call
• March 9, 2010, Midnight

The Obama administration has already implemented a program to bring relief to Americans — and much like government-run health care, it’s costly and complex. The Home Affordable Modification Program has become yet another example of how massive government programs fail the American people.

In February 2009, the Obama administration rolled out its foreclosure mitigation plan, aimed at providing relief for homeowners struggling to pay their mortgages. At its center was HAMP, a $75 billion taxpayer-funded initiative that offers struggling homeowners who say they can’t afford to make payments the chance to enroll in a months-long program in which, if everything works out perfectly and the homeowner’s qualifications are confirmed, the modification becomes permanent and the program pays a small incentive to the mortgage company.

But instead of helping up to 4 million troubled homeowners as the Treasury Department predicted, HAMP had produced only about 31,000 permanent mortgage modifications as of November. It seems the Obama administration failed to anticipate the program’s fatal flaws. While HAMP enrolled hundreds of thousands of homeowners, the vast majority who enrolled have not qualified for permanent mortgage payment reductions. This failure has put these homeowners in an even worse position than they would have been had they never entered HAMP.

HAMP is hurting more homeowners than it helps. For most enrollees, the program only offers false hope that they will be able to stay in their homes. These strapped homeowners sent mortgage payments to banks in a desperate effort to avoid foreclosure when that money could have been used for the move to more affordable housing.

In most cases so far, HAMP only delays foreclosure; it doesn’t prevent foreclosure. It doesn’t take an economist to realize that the longer it takes for homeowners to get out of mortgages that they can’t afford, the longer the housing crisis will last.

HAMP is not the silver-bullet solution for the housing crisis; HAMP is a failure. But as with the health care debate, instead of acknowledging problems, the Obama administration doubled down, using strong-arm tactics to expand the program and inflate the numbers. When HAMP’s bad numbers were reported last November, Treasury announced that additional pressure would be put on mortgage companies to grant more permanent modifications. Companies would be required to report to the Obama administration on a daily basis.

In a blatant display of the intimidation and hard-charging Chicago-style politics that this administration is famous for, Assistant Treasury Secretary for Financial Institutions Michael Barr said: “The banks are not doing a good enough job. ... Some of the firms ought to be embarrassed, and they will be.” But it’s the Obama administration that should be embarrassed, for promoting bad policy that creates false hope for struggling Americans and is doing more damage to our economy.

Unsurprisingly, the administration’s pressure didn’t work. The most recent numbers show about 116,000 permanent modifications, which is less than 3 percent of Treasury’s stated goal. Only about 10 percent of borrowers who got temporary modifications have successfully achieved permanent ones.

Time and again, the Obama administration has promoted complex federal programs to confront America’s economic problems. The well-documented failure of HAMP is a red flag for those who believe recovery can be achieved through government spending. The president must recognize that technocratic tinkering — whether in housing or health care — is not the way to strengthen our economy.

Rep. Jim Jordan is a Republican from Ohio.