Government-Devised Mortgage 'Rescue' Fails

In my piece over the weekend, I cited the Obama administration’s “Making Home Affordable” mortgage bailout plan as a paradigmatic example of why the public is right to distrust the federal government’s capacity to manage health care.


I quoted a grim New York Times article from January entitled, “US Loan Effort is Seen As Adding to Housing Woes.” The headline speaks for itself. The piece says that top experts have concluded that Big Government’s intervention to reverse the housing market spiral has actually accelerated said spiral:

Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

This week brings more bad news for “Making Home Affordable’s” central planners in Washington. In a new report, TARP Special Inspector General Neil Barofsky rips the program for:

…Having ill-defined metrics and for helping far fewer homeowners than originally proposed. “The program risks helping few, and for the rest, merely spreading out the foreclosure crisis.”

Poor planning, poor implementation, and no credible plan to demonstrate effectiveness? Go figure! It also turns out that–shockingly–the administration grossly over-promised the number of homeowners its scheme would assist.

The administration’s program has produced 170,000 permanent home loan modifications, which represents roughly 13 percent of the total trial offers extended, according to the latest data.

Barofsky’s report said it is possible the program only benefits half of the three or four million homeowners originally envisioned. Among other data, the program measures trial modifications, a metric Barofsky faulted for being, “essentially meaningless.” The number of permanent modifications could wind up being a small share of the millions of foreclosures filed in this year and during the past two years.

Add this to the woeful rhetoric-meets-reality record of the Stimulus (last time I checked, unemployment still tops 8 percent by a substantial margin), and one starts to wonder if the feds are, you know, incompetent when it comes to engineering large sectors of the economy. Meanwhile, the housing market continues to struggle mightily.

Consider this: “Making Home Affordable” did no such thing. The administration’s own watchdog and left-wing newspaper of choice admit as much. Yet, taxpayers are still stuck with a $75 Billion price tag for the failed program.

Obamacare will end up costing well over $2 Trillion over its (true) first ten years. This massive government plan makes Obama’s mortgage program look like a dusty, unwanted item on the discount rack at the dollar store.

They couldn’t handle a $1 Billion cash-for-clunkers program. They royally screwed up a $75 Billion housing effort. Now, they’re going to run our health care. To quote Hot Air’s Allahpundit, What could go wrong?

UPDATE: Like clockwork, the feds have introduced yet another mortgage bailout plan.

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