Obama Socialized Housing Policy: If At First You Don’t Succeed . . . Try, Try, Again

The fact that the Obama administration is reticent to release data pertaining to completed mortgage modifications speaks volumes as to the lack of success of this initiative. With almost a third of American homeowners now ‘underwater’ on their mortgages, Obama and team are sticking to their game plan to modify mortgages. Details of Obama’s revised game plan can be accessed MakingHomeAffordable.gov:

The U.S. Department of the Treasury and Department of Housing and Urban Development (HUD) today kick off a nationwide campaign to help borrowers who are currently in the trial phase of their modified mortgages under the Obama Administration’s Home Affordable Modification Program (HAMP) convert to permanent modifications. The modification program, which has helped over 650,000 borrowers, is part of the Administration’s broader commitment to stabilize housing markets and to provide relief to struggling homeowners and is a primary focus of financial stability efforts moving forward. Roughly 375,000 of the borrowers who have begun trial modifications since the start of the program are scheduled to convert to permanent modifications by the end of the year.

375,000? I will take the under on that. Why? As I highlighted on October 29th in my commentary “Mortgage Modifications: Statistically Insignificant”, up to that point a whopping 1,080 mortgages had been successfully and permanently modified. Policy makers believe 374,000 mortgages will be successfully and permanently modified in the last ten weeks of the year. Who’s zooming who? Would they like to place a wager on that? I’ll give odds.

Through the efforts being announced today, Treasury and HUD will implement new outreach tools and borrower resources to help convert as many trial modifications as possible to permanent ones.

Without spending excessive time detailing the administration’s efforts, the fact is very little has changed with their basic approach. They will attempt to facilitate the modification process by compelling mortgage servicers to perform.

Servicer Accountability. As part of the Administration’s ongoing efforts to hold servicers accountable for their commitment to the program and responsibility to borrowers, the following measures will be added:

– Top servicers will be required to submit a schedule demonstrating their plans to reach a decision on each loan for which they have documentation and to communicate either a modification agreement or denial letter to those borrowers. Treasury/Fannie Mae “account liaisons” are being assigned to these servicers and will follow up daily as necessary to monitor progress against the servicer’s plan. Daily progress will be aggregated by the end of each business day and reported to the Administration.

– Servicers failing to meet performance obligations under the Servicer Participation Agreement will be subject to consequences which could include monetary penalties and sanctions.

If in fact they do not perform or are delinquent in the process, the administration has agreed to publicly highlight their ineptitude. I read this as shaming them into performing. Does the adminstration truly think that approach will work? How do you shame the shameless? The banks that originate and service these mortgages are so far beyond being shamed that the mere thought of the administration considering this approach is comical.

Shaming banks at this juncture is the equivalent of stating, “the beatings will continue until morale improves.”  The problem is the banks are not receiving the beatings but au contraire, the banks are dispensing the beatings on both Washington and America.

Make no mistake, Wall Street still owns Washington. Socialized housing is akin to pissing into the wind. Where is this headed? Do not be surprised to see the Obama administration look to reignite efforts for mortgage cramdowns in which mortgage principal is reduced.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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1 Comment on Obama Socialized Housing Policy: If At First You Don’t Succeed . . . Try, Try, Again

  1. I can’t believe America has come to this. We have the President “shaming” the big Banks he just bailed out. The small Banks and Credit Unions will be the heroes in all this. Assuming they can survive the foreclosure and repossession wave (see: http://www.repofinder.com). Break up the big Banks and let the free market be free.

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