NYT: Obama's Anti-Foreclosure Plan Not Working

New York Times:

A continuing steep drop in home prices combined with rising unemployment is powering a new wave of foreclosures. Unfortunately, there's little evidence, so far, that the Obama administration's anti-foreclosure plan will be able to stop it.

The plan offers up to $75 billion in incentives to lenders to reduce loan payments for troubled borrowers. Since it went into effect in March, some 100,000 homeowners have been offered a modification, according to the Treasury Department, though a tally is not yet available on how many offers have been accepted.

Read the whole story: New York Times

Comments

[Lorianne]

Of course it's not working, it doesn't make any sense.

Don't try to sustain the unsustainable.
Don't try to reinflate bubble prices.

[dcrinaz]

Lorianne, how would this plan--which is not working for many reasons, mainly because it is up to banks to decide whether or not to participat­e--reignit­e the bubble? There have to sales for there to be a bubble, and excessive sales at that.

If you are going to make a statement, please make sure it is intelligent and informed.

[PhilipTaylor]

Its been almost 9 months now ans still NO REAL FORECLOSURE RELIEF!

W+T+F is going wrong? He Said he would do something back in September on that special trip to Washington!

[Lorianne]

There is nothing obama (or anyone else who would have been elected) can do to 'fix' this.
It's too big

[dcrinaz]

Yes there was, bankruptcy reform with cramdown. That would fix it within months. Banks would then have to renegotiate loans with owners instead of foreclosing on homeowners, throwing them out on the street, and selling the house at an artificially low price. If they don't, a judge would do it for them.

Anyone except homeowners can get a bankruptcy relief on their loans--and with cramdown. Look at GM and Chrysler. Even mortgages on investment properties and second homes can go under bankruptcy with cramdown. Do you know this, or are you talking through your derriere?

If it's okay with all other loans, why not for homeowners facing foreclosure?

[JaneQCitizen]

He? As is Obama?

I don't blame Obama for one minute ... except that he underestimates the depths to which sleazy banksters will go to rob us blind by taking our tax dollars AND our homes.

[Artos]

They have to keep the housing prices high, if they don't they can't justify keeping the Property taxes as high as they are and would have to explain to the public why they don't readjust the assessments downward as well as the taxes. Also the banks are lobbying to keep the prices high because if they aren't kept high then that means they lose further value on the foreclosed properties in their possession and the ones that they are or will sell.To lose that value would mean having to own up to more capital losses. Regardless of what they are telling us lately, such as todays news that housing purchases were up by six percent in April, I wouldn't believe it. I think those purchases are being made by the wealthy who are going to get wealthier once they sell them. The former owner of Countrywide has already made plans to buy up as many foreclosed homes as he can. He's betting that if things do improve by next year (Which I doubt will happen) then he can get even richer. If those houses were devalued significantly he would lose a substantial profit.

[Rule Of Law]

There are already suits around the country by homeowners trying to get their properties reappraised at their current value. I haven't heard of any winning, yet.

The high price of houses also underwrites the value of those hundreds of trillions of dollars in derivatives. That is what they are trying to prop up. If we knew the truth about the bank's exposure to those toxic bets, Obama would have to declare them all bankrupt, and that can't be allowed to happen.

[dnpvd51]

It is older white people that own most of the real estate in this country and by a long shot.

This government campaign to keep housing prices up is basically just sending everyone's money to homeowners. And the government is doing this by debasing the currency in a stupid attempt to keep housing prices elevated.

Well if it costs several thousands of dollars to fill the refrigerator, keeping housing prices high will just be one more stupid idea amongst a bunch of stupid ideas.

High housing prices hurt people.

Except for old rich white people in general.

[NevadaPatriot]

LoL,

[Lorianne]

Agree, mostly.
Except, you're wrong about one thing. High housing prices hurt everyone.

[dcrinaz]

Of course his plan is not working. It's too dependent on the banks, and the banks want to continue foreclosing.

The only thing that would have stopped foreclosures--and stopped it dead in its tracks--is bankruptcy reform with cramdown. And our dear Senate, with no help from the Obama administration, voted that down just recently because their masters at the banks told them to do so. Why? Because they prefer foreclosing on homes, even if it means they lose money, homeowners lose money, communities lose money and we all lose money. There is something perverse, illogical and sick in what they are doing, but the banks can't seem to help themselves and they continue to do it.

The only thing that will stop foreclosures is bankruptcy reform with cramdown. And that is it.

[Lorianne]

Cramdowns won't work, it would just reingnite another bubble.

[dcrinaz]

You obviously have not been reading any comments placed on other blogs, or you would have seen this issue discussed very thoroughly. I am curious why you think cramdowns won't work. What are you basing your assumption on? How will they create another bubble? From your comments, it is obvious that you don't understand what a cramdown or even a real estate bubble is.

By the way, cramdowns do work. They are used in bankruptcy for all other loans and they do not cause a bubble. They allow people to restart their lives. In the case of the real estate market, the will stop the opposite of a bubble, which is the artificially excessive drop in home prices that is being fueled by foreclosures.

Banks caused the bubble--the overpricing of homes, by giving out too many home loans to speculators. Now they are causing an artificially low price in homes because of excessive foreclosures. Either way, the banks have screwed us up and it is time we stopped them.

[dcrinaz]

Lorianne, explain how this will reignite another bubble? Do you even understand what you are talking about?

[BurtonOerney]

YEAs (senate vote for 2005 Bankruptcy Reform Act)
Baucus (D-MT), Bayh (D-IN), Biden (D-DE), Bingaman (D-NM), Byrd (D-WV), Carper (D-DE),
Conrad (D-ND), Kohl (D-WI), Landrieu (D-LA), Lincoln (D-AR), Nelson (D-FL), Nelson (D-NE),
Pryor (D-AR), Reid (D-NV), Salazar (D-CO), Stabenow (D-MI)
--doesn't this look a lot like the senate vote for the latest bankruptcy/mortgage assistance failure?

I have little sympaty for home owners, though. Property taxes have been decreasing since the mid '90s in my state http://www.budgetandpolicy.org/documents/lowtax.pdff.) With the decreasing tax base, low income housing subsidies are rare, and low income housing itself is disappearing. In last year's property tax reform debate, we were all talking about relief for the home owner in the form of tax caps and refund checks. Meanwhile, apartments continued to turn into condos and landlords could still raise rent with 60 days notice and kick you out of your home with a 3-day notice if you're just one day late on rent http://tenantsunion.org/rights/25/600DaysNoticeofLargeRentIncreases.)

[BurtonOerney]

Maybe if a lot of property owners have to deal with the indignity of apartment living, we could get some rent control around here.

[roncar]

I wonder what happened to that black lady at the Obama ralley caught on tape saying she wouldn't have to worry about paying her mortgage or putting gas in her car? I'll bet she's still mezmerized by the one.

[johnfrum]

Its not so simple. Think.

You are a homeowner making your mortgage payments and not without sacrifice. One neighbor got into his home with one of the stupid mortgage products -0 down and 2-3% a month for a couple of years that is about to reset . Another kept taking his equity out with refi's to spend on cruises, vacations, cars etc. and now is serious upside down. Another lost his job and now is about to lose his home. How do you separate the last guy from the other 2? And should you? If they all get bailed out are you going to keep paying or just stop and get bailed out too? Would you continue to scrimp and pay as you watch these jokers get their loan principal and rate slashed while you, who played it straight, get nada. It would be a disaster beyond your ken. Half the mortgages in the country would stop paying.

[MadHeart]

Of course it's not simple, but the fact is that 30 year and other fixed interest loans are on the chopping block now, mostly fueled by job loss. While I don't feel so sorry for the people who dipped into their equity for luxury purchases, perhaps the guy who took the sub prime was rooked by a fast talking mortgage broker, who knows? Lots of people were buying homes on the high end of what a broker said they could afford and were only shown those home. Bait and switch tactics were operating as well, such as showing the worse house for the lower price even when others might have been available that were better. It was a wild west period the last 8 years, ever since Bush told people to "go shopping" after 9/11. It was a time for the greedy to make their fortunes ever larger. If I were on the verge of foreclosure and several months in arrears after selling off as much personal property as possible to satisfy part of my debt, I wouldn't hesitate to walk away and find other accommodations, to be truthful. It's survival time for many.

[johnfrum]

I don't disagee with anything you say. (Although I can't make any sense out of the first sentence)
None of it changes the problems inherent in bailing out mortgagees. The problem is that in attempting to help some, there is a large risk of making the problem much much worse. It might be intractable. For certain, bailing out the banks and making whole bondholders was a bad thing to do. How can you expect ordinary people to bite the bullet when the fat cats who are probably more culpable than anyone are eased to safety, wealth intact? The "free enterprise/ free market meme that Americans have been sold just like any other product, has proven to be a lie. The system can survive if just the top of the pyramid is rescued but the psychological damage on ordinary Americans is immense. They have seen the game is rigged. The rich can't lose and they can't win.

You're not in Kansas anymore there toto.

[NevadaPatriot]

ARMS and front loaded mortgages, reverse mortgages, no money down should be illegal. It really is pretty simple. Mortgage Backed Securities, CDO's and CDS's instruments also need to be illegal or extremely well regulated.

[Rule Of Law]

Madheart--not just go shopping: He and Greenspan both went on TV and told Americans to buy Houses! In our latest issue of Consumer Reports there's a story of a 90 year old man who was sold a new mortgage that lowered his payments without it being made clear that his new monthly payment didn't even cover the interest on the loan. By the end of the year he owed more than he had originally signed up for. The bank tried to foreclose. On a 90 year old man. His lawyer was able to save his home for him, but how many others are there that weren't so lucky that we haven't heard about?

[ThatOne4Me]

Only banks, GM and AIG get massive bailouts.

[TJCole]

Always from the top down if you give the lenders the money up front like some shlemiel guess what they have no incentive to deal these usurious cold-hearted hypocritical bastages..­.banskters­...!

This is Obama Hurricane Katrina by a magnitude of 1,000....

He is failing the people who put their hope in him, whether misguidedly or not...fail­ing and forsaking them...

How about Settlements here Mr. President, affordable housing someplace for these people to go and maybe some blue collar jobs, good jobs, for even a few Americans if you see fit, please..?

[Rule Of Law]

It's the death of the Middle Class, the death of our life as we knew it and the death of this experiment in freedom called America.

[formerprosecutor]

My final comment onthis topic for today is ionformational
Do you know , thanks to the 2005 revisions in BK rules, and the failure of adding the crmdown portion in the recnet changes, that Chapter & BK will not protect your house, even if you are current. The lender can decide not to reaffirm. and if you are behind, they will immediatley foreclose without a cure letter.

There are no legal tools for the homeowner to use.
It appears that people, jobless, or ill, will havethe choice of sitting in the dark with no food vs gving up their home (to live where) apartments rent isn't any cheaper; something everyone forgets to mention.

I have seen homeless women ,under age 40 , on the streets of small town America lately.

this must stop.

[NevadaPatriot]

Yes, this is why I advocate telling people to default. If you cannot make payments and it is effecting health and there is no help. No sense putting money in the hands of greedy financial institutions that have created modern day financial slavery.

Better for people to keep what little money they can get and use it for their own interest.

2005 BK laws are nothing more then financial slavery.

[lvdragonlady]

Has his final plan even been implemented yet?? Could have swore that I read somewhere last week that it was in the final stages before it goes public?

[BurtonOerney]

No, it has not been completely implemented. Also, bankruptcy modification was supposed to allow judges to reduce principle in many cases but that didn't make it onto the floor for a vote. Let's call the president and his staff incompetent, greedy banksters, though. After all, he should be concentrating entirely on land owners and their problems. Nobody else matters.

[formerprosecutor]

Check my links I posted below

[MadHeart]

Another thing: job losses continue. 13% (or 1 in 8) of homeowners are anywhere from 1 mo past due to total foreclosure right now. This means that the next month of layoffs will probably push the 1 mo past due to 2 past due, on up the line, . and more will be forced into foreclosure, since there are few jobs available, esp. in certain industries. Going from a $50K job to a $25K job isn't going to help when your household budget is slashed in half. This is not getting better by any means.

[formerprosecutor]

And the ONLY thing that can stop this avalanche is an emergency moratorium on foreclosure

otherwise we will be looking at another great depression; grapes of wrath live and in person


Mr. President, do it now, don't wait until it is 1of 6 that lose their home

[formerprosecutor]

I can only hope and even pray , that someone in the White House reads HP comments.

Listen to us, there are at least three lawyers posting on here today, that have their fingers on the pulse of this nation. Viewing the patient from a distance and deciding what treatment should be will fail.

Please listen to us; that are doing battle, and losing, with these foreclosures.

[NevadaPatriot]

There are 2 things that will help stop foreclosures. The Obama Administration is not willing to do them:

1. Homeowner Loan Corporation created by Govt. The Govt. audits and assumes distressed loans. Renegotiates them with the borrower so that they can continue to make some sort of payment reflective of current income level.

2. Jobs. USA is a credit debtor economy. You cannot finance consumption through credit. Consume and finance, consume and finance, and consume and finance, while hardly producing anything and saving nothing. This nation needs fair trade and meaningful jobs. Without jobs public cannot save money for consumption. Credit / Debt economy is a failure it has destroyed our country.

Unfortunately, Obama is also failing because he is not addressing root causes of crisis. I am terribly disgusted by Obama's handling of the economic crisis so far. He is only willing to placate banks, defense, energy, insurance and pharma interests. The people of this country seem to mean very little to him other than they are a convenient listening group his speeches.

[NevadaPatriot]

I wonder what the difference between real and reported job loss is. There are so many that have dropped off the grid. I am sure that real job loss is much higher than reported. This statistic is always cooked.

[MadHeart]

In this NC lake county the official rate is right at 15%, but many people work in Charlotte (bankers who own lake properties). I know in my neighborhood, that everyone next door or across the street from me are unemployed, just in the last year, some longer. I could probably take a survey and find out there is at least 20% unemployment, probably 25% or more underemployment. My neighbors don't work for banks; this is a working class neighborhood. Substituting fast food and convenience store jobs for mfg jobs just isn't the answer. There is a christian ministry about a half a mile from me and the parking lot stays full; even social services makes a once a month mobile visit to ease crowds at the main office.

[Rule Of Law]

"This page has long argued that a robust anti-foreclosure plan should directly address the plight of underwater homeowners by reducing the loans’ principal balance. That would restore some equity to borrowers — and give them a further incentive to hold on to their homes..."

AND that is exactly why it will never ever happen. The banks feed off of debt--the more the better. Reducing it is not a part of their reason for existing. Re-balancing a homeowner's principle would decrease the amount of blood money the banks extract to keep growing, and would also endanger their ability to collect real estate on the cheap--as homeowners are forced out--to be resold, refinanced and repackaged as AAA derivatives with all the fees they generate.

The other consideration is that this is nothing more than bank generated social engineering. They are turning our country and the middle class out into the streets where the jobless, homeless, and savings-less have no power to challenge their dominance.

[NevadaPatriot]

I have been advocating reducing mortgage payments for distressed homeowners to 15% or 20% of their current income This would allow homeowners to stay in homes. Also, argue that the Federal Govt. should do this by stepping in and creating a homeowner loan corporation. Then assume the distressed loans from the banks after an audit and negotiate borrower payment plans directly.

Unfortunately this will never happen because of MBS, CDS, and CDO's derivatives that generate so much profit for Finance. It would ruin their Tranch valuation concept.

Currently, the Obama Administration is failing us miserably by not addressing derivatives. IMO they should be illegal or very tightly regulated. They are a root cause of systemic risk in Finance Market. And are blocking recovery of real estate market.

[formerprosecutor]

co-sign

[MadHeart]

Agree. Those collateralized debt obligations and credit default swaps are very much still out there and those tranches were created by greedy Wall St. types, of course. The homeowner is totally innocent while Wall St. is being made whole. Of course, consumers only make up 70% of economic activity in the US but we don't count for as much as the Masters of the Universe who may have taken a haircut on some things, but it didn't ruin their head while we are losing ours.

[WeMustSpeakOut]

Nothing but token legislation to soothe the masses. Once the peasant majority figures it out and thinks about rising up from their tent cities, they will be thrown another inadequate morsel wrapped in empty rhetoric.

The corporate owned government has no incentive to create any real anti-foreclosure legislation. Geithner does whatever is necessary to keep the banks well-capitalized with our money, and make their bad dept (foreclosed mortgages) magically disappear.

Nothing will be done that might compromise maximum wealth for the ruling class.

[MadHeart]

It's quite understandable when you read that private companies are handling toxic assets for the Treasury. Read "Geither's Web" here on HuffPo. The corporatocracy wins again.