David Dayen: HAMP Is Hurting Liberalism


by David Dayen/Shadowproof.com

I wanted to circle back to this point I made on our foreclosure panel that I really do think expresses both the frustration and the danger I and some other commentators are feeling about the situation. Simply put, HAMP is hurting liberalism. It’s putting a face of bureaucratic incompetence on a program designed to help people. It’s making the lives of its participants worse while promising to make it better. It’s adding to their indebtedness and failing to reduce their principal.

Of course, we know that it’s not a liberal program in any way, with its maddening structure as a public-private partnership where the lender doesn’t have to make any changes to the mortgage unless they determine it in their best interest to do so. And that design was a conscious choice, not the result of legislative compromise. I have to laugh at that sliver of the liberal commentariat who constantly excuses the President and the Administration for having to make painful choices given the Congress they have. The President, you see, isn’t that powerful, and must work within those legislative constraints. But none of this is true with respect to HAMP. The Administration designed this entirely on their own, using money already appropriated. And they designed it terribly.

In fact, they lied right from the beginning, according to Sen. Jeff Merkley, who was also on the panel. He was told that the White House would devote $50-$100 billion in TARP money to homeowners and that they would fight for cramdown (what he would rather call lifeline bankruptcy) when it came up in Congress. These were the conditions under which Merkley voted to release the second tranche of the TARP money. And neither of these two things really came to pass. The White House stood mute as cramdown failed, and though HAMP is supposed to have $75 billion in backup, they’ve spent less than one-half of one percent of it.

Without the threat of a bankruptcy judge modifying the mortgage as a hammer on the side of homeowners to get lenders to comply, the HAMP design totally failed. It was no longer in the financial interest of the lenders to do anything, and so millions of people come into a system and get really nothing out of it. They end up more indebted and just float along, propping up the banks who don’t want to acknowledge the bad loans still on their books. This was the Administration’s design, specifically Gene Sperling’s design, according to reports. And as I said on the panel, he should be fired for the damage he’s causing. Obama is famous for saying he only cares about what works. Well, this isn’t working.

The more important damage is to those getting no relief on their mortgages, falling victim to predatory lending for the second time, first from the loan officers and now from the government. But on another level, it’s only confirming what Ronald Reagan famously said, that the most dangerous words in America are “I’m from the government and I’m here to help.” That’s true when a neoliberal, extend-and-pretend scheme designed more to save the banks from reality than help people gets implemented. Those people getting foreclosed or losing everything they’ve got can point the finger at one thing, that government didn’t provide a safety net for their struggles. As Elizabeth Warren said on the panel, in the 1930s we had a belief that government could step in and help us with our problems. And that has faded. It faded over the last thirty years with a coordinated demonization of government and it’s fading now because the group in the White House has a different worldview, one oriented toward the banks over the people. And so how can you tell the guy in this story to vote for Democrats ever again? (cont’d.)

At the foreclosure panel I went to, HuffPo’s Ryan Grim, who had been interviewing people around town, told the story of a 50something guy who was going to lose a house he’d put $100K down on. A lot of the Tales Of Foreclosure Hell have focused on people who bought houses with little money down and who therefore in some sense didn’t lose much, but there are a lot of people who did lose/will lose their life savings over this.

I get the occasional angry email because I’m not hopey changey enough, but right now I’m angry at the administration over HAMP. It was their baby, it didn’t require Congressional action of any kind, and when it was introduced the usual suspects said it was unlikely to help people. More than that, it’s actually hurting people, extracting payments during the extend and pretend period before finally chucking people out.

Ironically, that guy did say he’d vote for Harry Reid over Sharron Angle. But over time, he knows that the government did not step in to help when his work dried up and everything he worked so hard to create went away. And millions of people join him in that belief. And so the idea of government as a backstop for those facing troubled times, as a great equalizer between the average people and the seats of power, just crumbles.

I was talking to Jack Conway, the Senate candidate from Kentucky, and he said that the biggest issues from constituents on the campaign trail are spending and jobs. I asked if he explains that the two are contradictory, and he explained that people don’t see it that way, that they’ve concluded that more public spending will not create jobs but just go to the banks on Wall Street. I don’t know if the Administration understands how pernicious this game they’re playing is. It could last for a generation.

This program is not just a terrible deal for struggles homeowners – it’s a terrible confirmation of government not working. It needs to stop and those responsible need to be fired, before it consumes the entire progressive project in its wake.

6 Responses

  1. If you’d let me know, David, I’d have offered to entertain here on “The Compound,: about an hour west by northwest of Frankfort.

  2. Mr. Dayen is correct. HAMP was designed to conceal the true nature of these loans. Anyone who has requested a HAMP modification should ask — “What contract is being modified?” and “Who will the modification contract be with? They cannot answer these questions, HAMP just postpones correction of title to the property. Hope the Senate passes the GSE FOIA soon..

  3. All this political banter suddenly? What about Obama’s 8 years of nothing to help homeowners. Both parties are owned by these “lenders”.
    HAMP is non partisan as we know is a farce!
    My family home if 16 years was a HAMP and after making an extra 4th and 5 th payment, Wells/BANA stole it anyway. Our top
    Officials in BOTH parties have the gavel and have screwed us…

  4. Hit the nail on the head David. I truly do not understand how SIGTARP can publish the figures they do without demanding an end to HAMP. Major banks report over 80% denial rate. The denial/failure rate is actually closer to 100% because the servicers increase payments after getting homeowners to agree to a modification. I truly believe a good contract lawyer would never have let homeowners sign the paperwork.

  5. One of modification thru Wells Fargo Bank of my Orange County house I spent several months working on it I tried again! Was denied Bank said, cause the original forms were unreadable which is the same form was mailed from the bank themselves!
    The Bakersfield house WFB were sneekier! It was in default in 2013, then the last 5 days of danger I FedEx the 10 months payment but the last time in March 21/17 was Forclosed! I couldn’t find a way to catch the ball! WFB blamed the history of the mortgage! Blamed the environment surrounding I guess turning desert to green WF don’t like to appreciate it! WFB has no conscience even that I’m making 4 times income of mortgage they decided to sell our loan to Investors impossible to communicate with BSI

  6. chase bank reneged on 2 loan mods, first one claiming i did not get the signed loan mod back in time but i suspect it was because the lender on the loan mod doc was now reading JP morgan chase, successor to WAMU which is ironic since when I did my refi in 06, it was supposedly JP morgan chase, at least thats how the mortgage papers i signed in 06 read as the “lender” and now the loan mod reads as something else. No wonder they reneged on the first loan mod so then they told me i had to go thru the paperwork process again and they gave me a second loan mod which they said I signed it incorrectly, but they didnt give me a chance to correct that one. Thieves and liars, thats all the big banks are.

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