Perhaps the government's homeowner assistance program should be renamed the bank assistance program.
Big banks have profited from HARP 2.0, the government's expanded version of the Home Affordable Refinance Program, by charging higher interest rates to existing borrowers who qualify for refinancing, the American Banker reports. The aim of the program is to help the most underwater borrowers refinance their mortgages at market rates.
Amherst Securities came to a similar conclusion about HARP 2.0 last week. Since less competition mean more power for a lender, banks are "charging higher rates to HARP borrowers and... earning massive profits on originations," the analysis found.
Neil Barofsky, the former special inspector general for the TARP bailout, referred HARP 2.0 on Twitter as "backdoor bailout no. 743."
Yet from its outset, HARP 2.0 benefited banks. The program eliminated Fannie and Freddie's ability to force banks to take losses on loans sold to the government-sponsored enterprises after defaulting and being refinanced through HARP 2.0. Instead, the program shifted the future losses to taxpayers.
HARP 2.0 is only one of many homeowner assistance programs to have been roundly derided by critics. The Home Affordable Modification Program, or HAMP, fell far short of President Obama's 2009 goal of aiding 3 to 4 million struggling homeowners. Instead, the program has achieved just 768,773 active permanent modifications for homeowners as of the end of last year.