The Treasury Secretary, in an interview with Jake Tapper, addressed the fact that only 66,000 permanent modifications have been extended to borrowers. This is despite the fact that the Obama administration initially estimated three to four million homeowners modifying their mortgages.
Seventy-five billion dollars was set aside through this program to assist over three million homeowners facing foreclosure, yet less than 70,000 have actually received any help. At this rate, it will take the program over 20 years to reach its goal.
But what if the goal was not to provide loan modification assistance to millions of borrowers? If the objective of the plan was merely to create some optimism in the mortgage markets, then it was just a $75 billion public relations scheme.
However, if propaganda with the intent of propping up the housing market was the intent, it was still a hugely expensive advertising campaign. Pretending that the housing market was doing better than it was in reality was the job of economists for many years -- not the government.
Is it more conceivable that the main objective of the government's program was to continue paying off Wall Street and other political interests? If this is the case, the failure of the modifications becomes much more of a "success" the government can claim.
Seventy-five billion dollars for 66,000 mortgage modifications means that each modification could have cost the taxpayers over $1 million. Of course, spending millions of dollars to help homeowners with hundred thousand dollar mortgages is not what the government has done.
So where is all the rest of the money? Tens of billions were appropriated to help millions of people stop foreclosure. After a year, there have been very few modifications given. So has the money been spent? Handed out in corrupt deals? Or is it just sitting somewhere?
If the money is just sitting in a bank account somewhere, maybe it is time to return it to the people and fire the bureaucrats who have thus far failed to implement this government plan to save homes from foreclosure. After all the previous failures, why was this one expected to succeed?
Although the government can intervene in the housing market and temporarily prop up prices and provide incentives to banks to offer modifications, this does not help the housing market in the long term. Once the programs are stopped, what happens then? Prices begin to fall again.
And the government programs can not last forever. Already, the Federal Housing Administration is seeing increases in the default rate of mortgages extended through its plans. Once the government can no longer offer subsidized mortgages to poor credit risks, the housing market will have to decline to adjust for the smaller number of people able to buy.
Strategic default is another concern affecting homeowners. As prices continue to decline, foreclosures increase, and neighborhoods get poorer, more people will be willing to walk away from their mortgages just to escape.
In the end, we have to ask the government, is it really worth spending tens of billions of taxpayer dollars just to propagandize them about the housing market, lying to them about the availability of loan modifications and their ability to qualify for such plans? Especially when most homeowners can just look around their communities for evidence contradicting the false optimism of the bureaucrats?
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What Ever Happened to That Obama Mortgage Modification Plan?