White House Attempts To Help Homeowers “Meaningless”

The Administration’s Home Affordable Modification Program was meant to spend as much as $75 billion to keep people in their homes. Mortgage holders who could not make their monthly payments might have them lowered after going through what turned out to be an inefficient process to look at their circumstances. The theory behind the plan was simple. People who stay in their homes do not face foreclosure. That, in turn, will keep the inventory of vacant houses at a relatively low level which should help the real estate market recovery. It appears that almost no part of the theory worked.

Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, said in a report the program may help one million to two million homeowners over the course of its four-year life. That is in contrast to the Administration’s estimate of eight million. A report from ABC News says that Barofsky called that plan as “essentially meaningless”.

So far the Administration’s mortgage modification program has given 1.6 million homeowners “trial” status which means that they are under review as candidates for permanent status, which has been award to only 170,000 people.

Much of Barofsky’s report will focus on the confusion created by the program for applicants and the bureaucracy that it has created at lending institutions. In other words, the Home Affordable Modification Program might have worked but it was never properly administered.

Part of the problem is that some people who received modifications later defaulted on their obligations anyway. It is impossible to tell whether that is because there was a change in their financial circumstances after they received mortgage relief or whether the screening process was so poorly done that it identified the wrong people to receive aid.

Between the lines of Barofsky’s analysis in one simple criticism. No program can be better than the system to run it.

Douglas A. McIntyre

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