HOPEless For Homeowners Act

The American dream is becoming a nightmare for so many. With 23% of American homes worth less than their outstanding mortgages, and with most laws relegating the lenders in foreclosures to repossess the house only (and not have any rights against the personal net worth of the homeowners), the temptation for homeowners who are “underwater” to “walk-away” seems destined to continue to drive the price of most homes through the floor, below that even! Look to see that 23% number rise in the coming months.

So what happened to the $300 billion HOPE for Homeowners Act? After all, the program, launched last month under the aegis of the Federal Housing Administration was, according to the Congressional Budget Office and the Senate Banking Committee, supposed to allow 400,000 homeowners to switch out of risky loans into 30 year fixed rates based on 90% of the current appraised value (“loan-to-value”) of the home – a “reset” of the principal amount. The FHA effectively was guaranteeing the new loan (up to $625,000), but there was a catch: the government and the homeowner had to split upside equally on sale… oh, and another catch, the lenders had to be joyfully cooperative in writing down their principal.

Wow! Gee! Walk away with no liability or take on another loan, make payments for years, split the upside equally with your friendly local lovable feds, and convince your lender (who probably has sold off the loan anyway) to take a lower principal amount. These guys should be in marketing! How’re they doing? Here’s the Los Angeles Times today: “[T]he early results are discouraging: the government received only 42 applications in the program's first two weeks, according to the Federal Housing Administration. The low turnout was first reported by the industry newsletter Housing Wire. Since the applications take about 60 days to process, no loans have been approved yet.

“Steve O'Halloran, spokesman for the Department of Housing and Urban Development, called the projection of nearly 20,000 borrowers ‘an extremely preliminary estimate of early applications for a program that is barely a month old. Borrowers and lenders are continuing to sign up. Borrowers and lenders are continuing to sign up.’ Since the program requires lenders to voluntarily reduce the value of a loan and take a loss, it's unclear how many lenders will participate.”

20,000 homeowners expected to sign up by next fall. Let’s see… hmmm? That about 95% less than they thought. Pretty close guess by recent governmental standards, don’t you think? In the raging river of bad ideas, what’s a little more water? Oh, did I tell you the name of that LA Times article? Expectations lowered for new mortgage aid program. Yeah, and don’t forget to vote tomorrow, if you haven’t already.

I’m Peter Dekom, and I approve this message.