Administration Takes Credit for Four Million Mortgage Modifications, For Some Reason
It’s no surprise that governments try to put their best foot forward on policies they’ve enacted. But this can frequently slip into a defense of policy that bears no resemblance whatsoever to the actual policy itself. Such is the case with the Administration and housing policy.
In a blog post celebrating the release of a report called “Creating Pathways to Opportunity,” Gene Sperling and Melody Barnes tout the various initiatives that have enabled Americans to achieve upward mobility. Now, America is at a low ebb in upward mobility, perhaps since the Gilded Age, so it was going to be hard for Sperling and Barnes to nail the dismount on this one. And I guess that’s why they’ve opted for outright dissembling:
Mitigating the Impact of the Housing Crisis. When the President took office in January of 2009, the housing market had seen major losses for 30 straight months, slashing home equity in half which combined with the recession left many communities struggling economically. To begin rebuilding our housing market and economy, the President jump-started mortgage loan modifications, which help to keep families in their homes. More than 4 million families have had their mortgages permanently modified since April, 2009 – nearly twice the number of foreclosures which occurred in that time. And to help over 1 million Americans avoid homelessness, the President provided $1.5 billion through the Recovery Act for the Homeless Prevention and Rapid Re-Housing Program.
I’ve bolded the offending section. How can they come up with this number, that 4 million families have received permanent modifications, when we know that HAMP only delivered around 700,000 permanent mods?
It turns out that this talking point has been around for some time. Every month, the Treasury Department and HUD put out a monthly housing scorecard. You can find the most recent one here. And every month, the number of permanent modifications swells in this scorecard. You can look on page 3 of the scorecard, and you see a statement about modifications that includes “FHA Loss Mitigation,” “Hope Now Modifications” and HAMP mods in this analysis. FHA Loss Mitigation is essentially the program for modifying FHA loans. That really hasn’t changed under Obama; it was humming along from 2004-2007 to keep homes out of foreclosure. Hope Now is the original Bush Administration housing initiative that is just a hotline, and a vague way to “bring homeowners and lenders together.” What the Administration is counting as a modification they initiated, then, is really just a proprietary modification done in-house by the lender. This incorporates those modifications you hear about where the monthly payment goes UP rather than down. It includes the modifications that the banks force the borrower to take after they get denied for a HAMP mod. It even appears that trial HAMP modifications are being counted here, though they do say “permanent” in their boasting.
Basically, the Administration is saying that they should get credit for every loan modification generated in the country, whether they had anything to do with it or not. And there is substantial difference between a modification that reduces principal or actually allows a delinquency to cure, and a proprietary mod that may have no benefit to the homeowner.