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Did Obama Break His Pledge to Force Banks to Help Homeowners?

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Has Obama broken his pledge to help struggling homeowners facing the threat of foreclosure?

ProPublica has a lengthy article out examining the ways that the Obama administration has failed to come through when it came to changing bankruptcy laws and forcing banks to modify mortgages.

On the campaign trail back in September 2008, Obama pledged, "I will change our bankruptcy laws to make it easier for families to stay in their homes." Over three years later, the foreclosure crisis is far from over, and, as ProPublica reports, Democrats feel that he has fallen short of his promise.

The piece zeroes in on two particular shortcomings: first, the administration's reluctance to get behind "cramdown," which seeks to give bankruptcy judges the authority to renegotiate home mortgages. And second, the administration's signature anti-foreclosure effort, the Home Affordable Modification Program (HAMP), which merely offers banks incentives to modify mortgages, and his been roundly regarded as a failure.

Although Obama initially included cramdown as part of his proposal to stem the tide of foreclosures, ProPublica reports that "when it came time to fight for the measure, he didn't show up. Some Democrats now say his administration actually undermined it behind the scenes."

ProPublica lays out an array of damning quotes from Democrat lawmakers.

"We would propose that this stuff be included and they kept punting," said former Rep. Jim Marshall, a moderate Democrat from Georgia who had worked to sway other members of the moderate Blue Dog caucus on the issue.

"We got the impression this was an issue [the White House] would not go to the mat for as they did with health care reform," said Bill Hampel, chief economist for the Credit Union National Association, which opposed cramdown and participated in Senate negotiations on the issue.

Likewise, Treasury Secretary Tim Geithner and Larry Summers, then Obama's top economic adviser, were not in favor of cramdown, ProPublica reports. According to Rep. Zoe Lofgren, who led the charge for Cramdown in the House, Geithner "was really dismissive as to the utility of it," while Summers, in private meetings "was not supportive."

"Their behavior did not well serve the country," Lofgren told ProPublica.

Meanwhile, HAMP, the program that the administration is supporting, is doing little. As the Huffington Post reported last October:

"Far from helping at-risk homeowners, the Home Affordable Modification Program has actually made some homeowners worse off, according to the Special Inspector General for the Troubled Asset Relief Program -- also known as the Wall Street bailout. The Treasury Department set aside $50 billion from TARP, plus another $25 billion from taxpayer-owned Fannie Mae and Freddie Mac, to give mortgage servicers thousand-dollar incentives to reduce monthly mortgage payments by modifying eligible homeowners' loans. But more people have been bounced from the program than have been helped by it."

The really bleak part, as ProPublica points out, is that homeowners facing bankruptcy are forced to undergo great scrutiny while bailed-out banks were given a comparatively free pass:

While the government had been relatively undiscriminating in its bank bailout, it would carefully vet homeowners seeking help. HAMP was written to exclude homeowners seen as undeserving, limiting the program's reach to between 3 million and 4 million homes.

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