Billions of Tax Dollars Spent Raising False Hopes Among Homeowners
The Obama Administration’s Home Affordable Modification Program (HAMP) gave “banks $1,500 bonus payments and servicers $1,000 bonus payments for each loan modification they processed. This system encouraged mortgage servicers to approve temporary ‘trial’ loan modifications, even as they continued the foreclosure process against borrowers. Ultimately, after collecting the bonuses, they would deny permanent mortgage modifications,” notes the Washington Examiner, citing the findings of Neil Barofsky, a former special inspector general for the Troubled Asset Relief Program.
Barofsky’s “damning indictment” of this waste of taxpayer money is contained in a new book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street. The conclusions aren’t the result of any partisan hostility to the Obama Administration; Barofsky is “a registered Democrat and Obama donor.”
Some homeowners ended up being made much “worse off by Obama’s bailouts,” notes The Washington Examiner in its review of the book. “One California business owner who could have sold his house at a loss, but maintained some savings and his credit history, was enticed into a HAMP trial modification that was supposed to cut his payment in half. Instead, thanks to HAMP, he lost his house, his savings, his credit and his business.” The program seems almost to have been designed to delay foreclosures until just after the 2010 election, and delay formal recognition of banks’ losses: “By delaying millions of foreclosures, HAMP gave bailed-out banks more time to absorb housing-related losses . . . According to Barofsky, Treasury Secretary Tim Geithner even had a term for it. HAMP borrowers would ‘foam the runway’ for the distressed banks looking for a safe landing.” (This reminds me of how federal officials successfully pressured taxpayer-subsidized Solyndra to delay its announcement about upcoming layoffs resulting from its bankruptcy until just after the 2010 election, to avoid embarrassing the Obama administration.)
Homeowners may not have benefited, but special-interest groups certainly did. They profited at public expense from Obama Administration policies. The Obama Administration has used taxpayer money to bail out real estate speculators and flippers whose loans were held by certain banks. It has also ripped off mortgage investors and pension funds to benefit those banks. It has also funneled money to left-wing advocacy groups through legal settlements with banks. The Obama Justice Department has used the threat of lawsuits to force banks to pay out hundreds of millions of dollars because they used perfectly reasonable lending practices (The Wall Street Journal calls the Justice Department’s recent $175 million settlement with Wells Fargo a “racial shakedown” based on no wrongdoing), and to force them to lend to high-risk borrowers (the Assistant Attorney General for Civil Rights “has compared bankers to Klansmen” for using traditional lending standards that do not lead to as many loans to minorities as he would like).