New reports have documented that the Obama administration’s mortgage relief program isn’t working. This is to say it is not helping assist homeowners facing foreclosure. Instead it is taking money from struggling homeowners and channeling it to banks. The program, which many purport is poorly designed and executed, has only aided a small proportion of individuals actually seeking and needing assistance.
In theory, the program was supposed to lower monthly payments for borrowers. However, it doesn’t even reduce the overall debt burden that many homeowners facing foreclosure experience. Now it has been discovered that top treasury officials admit that the mortgage plan was actually designed to pump money into banks in an effort to protect them from future losses and bad debt — in essence another program implemented in the interest of Wall Street over Main Street.
Timothy Geithner, who wanted banks to make money in an effort to stabilize the economy, has used the mortgage relief program to enrich bankers riding on the backs of troubled homeowners when the focus should be to assist struggling individuals who are trying to keep their homes.
The Home Affordability Modification Program (HAMP) allows homeowners to ask their loan holders for relief on monthly mortgage payments via reduced monthly payments or lowered interest rates, for example. This is a win-win for banks because it keeps monthly payments coming. However, it actually gives homeowners the shaft because the banks do not lower how much individuals pay, thus individuals end up paying more for their homes than they are actually worth on the market.
Although Obama’s economic team continues to repeat the mantra “the economy is continuing to recover,” the fact remains that in terms of the aforementioned and economic indicators I read, that is not the case. If Obama is genuine about helping troubled homeowners, then his efforts should target having an individuals debt burden from their mortgages reduced. Banks will take a loss, but massive foreclosures will be averted. This is not a recovery and if the advice of folks like Geithner and Larry Summers is what Obama is using, then we will be up the creek for a long time to come. In all simplicity, we need around 2.5 percent growth just to keep unemployment from rising and until we are honest and admit this is not a recovery, things will only get worse before they improve.
Black folks need to wise up and increase their understanding of economics and look at policy as policy, regardless of who it comes from, even if it is a black president. If we don’t, then Kanye West may be saying, “Barack Obama don’t like black people.”
–torrance stephens, ph.d.
