Plan B

The government’s foreclosure relief program – euphemistically called the Making Home Affordable program – is a total bust. The December 11 Washington Post: “Only about 4 percent, or 31,382, of the 728,000 homeowners currently in the program have moved from the initial, or ‘trial’ phase, to a permanent loan modification. That leaves thousands of borrowers in limbo and in jeopardy of losing their mortgage help because they have not turned in enough paperwork to prove they qualify.” Complicated government paperwork combined with reluctant banks and unworkable rules have made this attempt at grassroots assistance a worthless waste of taxpayer money. Despite threats by the government to assess penalties in order to move lenders to process applications, 21% of those who have completed the application process and made all required payments just sit and wait.

Funny how the government has no problem helping the mega-financial players but cannot for the life of itself figure out how to help the majority of ordinary citizens who have contributed their tax dollars for years, only to see massive subsidies of huge investment banks, who now have an embarrassment-of-bonus-riches, just as so many Americans are jobless and about to lose their homes. We’re not talking about the idiots who over-borrowed, with no real down, on fictitious earnings statements, in that ugly subprime mortgage market. Now we’re down to Americans who did it right, but the economy did them wrong.

The notion was to adjust mortgages for qualified homeowners in financial straits to 31% of their income; this represents, on average about $550/month for the very, very, very few who qualified. As the unemployment numbers stabilize, the number of new foreclosure filings is dropping as well, but the inventory of foreclosed homes now owned by banks is staggering, seven figures of houses sitting and pulling down a fragile market that could easily trip and fall farther.

“‘How long are you going to hit your head on the wall before you go to Plan B?’ said John Taylor, president of the National Community Reinvestment Coalition, a nonprofit housing advocacy group. ‘It's just that the numbers are not remotely close to making a difference. They have to come up with another strategy, because time is not on their side.’” The Post.

Lenders claim they are overwhelmed and cannot hope to deal quickly with the burden; others say lenders are foot-dragging. One story reported by the Post is typical: “Lawrence Ingalls of Santa Ana, Calif., began asking J.P. Morgan Chase for help on his mortgage in January when he learned that the market research firm where he worked was likely to close... He is now dipping into his savings, borrowing from family members and falling behind on his property taxes to keep up with his mortgage payments… For the past 11 months, Ingalls said, he has submitted and resubmitted parts of his application: ‘Every single month, without fail, I have to resend something.’… He has faxed more than 100 pages of tax returns at least twice. Two weeks ago, J.P. Morgan Chase again requested a current utility bill to prove he still lived in the property. He now scans the requested documents so he can e-mail them as well as send a fax and a paper copy by mail… ‘They tried to cancel my entire application in September because of incomplete paperwork,’ he said. ‘But the lost document thing in my experience is totally on their end.’” J.P. responds that Ingalls simply did not qualify and that they had denied the application months ago.

Bottom line: banks don’t feel good enough about themselves or the economy to embrace massive refinancing with anything near what commitment the Obama administration would like to see. Whenever you hear a litany of “explanations and excuses,” and a government policy simply does not produce the desired results, the message is clear: abandon plan A and go to plan B. Okay, Mr. Obama, what exactly is “plan B”? Or do homeowners have to change their names to “Mr. and Mrs. Goldman Sachs” to get some help?!

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