Foreclosure Aid: Another Government Boondoggle

The Obama Administration's efforts to solve the housing foreclosure problem by throwing billions of dollars at it has been exposed as an unqualified flop. However, it took Wall Street analysts to force the government to admit the $50 billion Home Affordable Modification Program (HAMP) has failed to achieve its objectives.

In reviewing statistics released by the Treasury Department, some smart money folks noticed the numbers were out of whack with rising foreclosure rates. They asked Treasury to audit its numbers. Treasury passed the buck to Fannie Mae. The statistics were revised, which is government speak for, "We were caught red-handed with bogus data."

The new data released by Treasury raised eyebrows from Wall Street to Main Street. Here are just a few nuggets from the "revised" statistics about the HAMP program, which began in March, 2009:

1. More than 40 percent or about 1.3 million borrowers who started in the program have dropped out. Less than 30 percent have received permanent new terms on their loans.

2. Dropout rates among borrowers are increasing. About 91,000 borrowers dropped out in June, nearly twice the pace of those getting a permanent modification in their mortgage terms.

3. Borrowers with modified mortgages are defaulting on their liens at nearly twice the rate as it was originally reported by Treasury. For example, those borrowers who had their permanent modifications at least nine months defaulted at six times the rate the original numbers showed.

4. For loans permanently modified for at least nine months, 19.6 of those loans are now at least two months behind on their payments. On loans modified for at least half a year, 10.1 percent of homeowners are 60 days or more behind on payments.

These numbers come as no surprise. The government is bailing out people who should have never bought a home in the first place because they did not qualify. Does anyone expect that in today's lousy economy these same people will somehow find the new terms easier to meet?

Even these dismal figures are suspect. Consider that Realty/Trac, an independent research and tracking firm, says that lenders repossessed 92,858 homes in July, the second-highest monthly total ever recorded. Bank repossessions rose six percent from a year ago, when the housing market was in worse shape than today.

An objective review of the situation should convince Washington bureaucrats to quit throwing more money at the problem. That's what is wrong with rational thinking in today's environment dominated by an out-of-control Democrat-led spending spree that is creating a staggering mountain of debt.

The Obama Administration announced this week it would add another $3 billion in foreclosure aid to bailout homeowners. This is throwing good money after bad and expecting a different outcome.

But that's not the most insidious aspect of this new effort. Instead of spreading the money to homeowners across the country, the government in its wisdom decided to spend $2 billion in only 17 states and the District of Columbia. Those states, with two exceptions, are states that voted Democratic in the past election. Coincidence? Not in this administration.

Here's a prediction: when this newest effort fails, as it surely will, the Obama Administration will dump billions of additional dollars into already bankrupt Fannie Mae and Freddie Mac to permanently bailout irresponsible home borrowers. They will be given some sort of mortgage "amnesty" to allow them to live "free" in their homes just in time for the November mid-term elections.

Remember where you heard it first.