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Forgive this momentary foray into the kinds of things decided in the White House, not the Wilson Building, but this is a real estate blog, and there is some big real estate news afoot: Yesterday, House Republicans voted to end the Obama administration’s troubled foreclosure rescue program, affectionately known as HAMP. The White House is trying to save it, but the New York Times has already written an autopsy that’s worth reading if you haven’t been following this stuff closely for the last three years.
So who killed HAMP? Basically, the Times concludes, everyone:
An examination of federal documents and lawsuits, and interviews with legislators, state attorneys general, housing counselors, homeowners and regulators, reveal a federal mortgage modification program crippled by weak oversight, conflicts of interest, mind-numbing complexity and poor performance by many participating banks.
Of course, all the players blame each other to differing degrees. Homeowners who’ve been turned down for loan modifications say banks have lost documents and been inflexible. Banks say they had a narrow window to handle a flood of foreclosures, and can’t just write down the principal on loans willy nilly. A Congressional oversight panel found that Fannie Mae and Freddie Mac, who were paid hundreds of millions of dollars to administer the program, was compromised because it held the credit risk on most problematic mortgages. Treasury says it didn’t have the authority to back Fannie and Freddie up by imposing fines on the banks that didn’t hold up their end of the deal, and furthermore, that most American homeowners were just further underwater than they originally realized. The special inspector general for the bank bailout, Neil Barofsky, says that’s bullshit: The administration should have flexed its muscles and forced banks, which received a massive federal rescue themselves, to pass along the favor.
I don’t know whether it would have been possible to design and implement a federal program that would work. I do know that in D.C. at least, smaller programs have probably gotten more homeowners help quicker, like the Neighborhood Assistance Corporation of America’s loan modification road show. There’s also finally more help on the way in the form of beefed up housing counseling, the lack of which worsened the crisis initially. And we’ll see whether new rules governing how a bank may foreclose on homeowners will help people hang on to their homes, or just drag out the process.
So I guess the takeaway here is that even when multi-billion-dollar programs are underway to solve gigantic problems, local governments shouldn’t sit around and do nothing. Because there’s always the possibility that massive federal action won’t work the way it’s supposed to.