In the Washington Post this morning, Dana Milbank tells of his woes refinancing his mortgage:
Last fall, my wife and I refinanced our mortgage with Citibank. Sixty days later, we received a "cancellation notice" from our homeowners insurance company "for non-payment of premium."
Turns out Citibank, which had been collecting hundreds of dollars a month from us to pay the insurer, hadn't made the payments. It was, I later learned, one of the usual tricks mortgage servicers use to squeeze more cash out of their customers. About a month later, I learned of another trick: Citibank informed us that it was increasing our monthly payment by nearly $300.
Along the way, a simple refi became a months-long odyssey: rates misquoted, interest charged on a phantom account, legal documents issued in wrong names, a mortgage officer who disappeared for days at a time (first it was his birthday, then his laptop was in the shop), a bounced check from Citibank's own title company, and the freezing of our bank accounts.
Truth be told, I'm sorry for Milbank. I had some family members go through a wrenching and unnecessarily difficult situation involving their attempt to purchase a short sale, and the banks involved messed things up every step of the way. If Milbank is arguing that the banking and mortgage industries need to be more accountable, transparent and consumer-friendly -- there's hardly an American that would disagree with him.
But then Milbank pivots and, incredibly, uses the well-known problems in the mortgage industry to defend the deservedly-maligned Housing Affordable Modification Program (HAMP):
It's a bad situation - and the new majority in the House is poised to make it even worse.
Republicans are aiming to repeal the Home Affordable Modification Program, the Obama administration's main response to the foreclosure crisis. The program, by all accounts, has been disappointing, helping only about 600,000 homeowners of the 3 million to 4 million projected. But its failure, watchdog groups say, was caused by the mortgage servicers' ineptitude - lost paperwork, bad accounting and the like - and lack of concern about whether the mortgages they service (but don't own) go into default. Rather than crack down on the banks, the House Republicans would kill the one program that, at least in theory, gives borrowers some chance of avoiding foreclosure.
"If you take that away, you've got nothing," says Julia Gordon, senior policy counsel at the Center for Responsible Lending. "The servicers can just do whatever they want."
Any excuse to bash Republicans, I guess. But on the merits this is pure nonsense. After all, here's how Neil Barofsky, the Obama administration's Inspector General for TARP, described the program:
The American people are essentially being asked to shoulder an additional $50 billion of national debt without being told, more than 16 months after the program’s announcement, how many people Treasury hopes to actually help stay in their homes as a result of these expenditures, how many people are intended to be helped through other subprograms, and how the program is performing against those expectations and goals. Without such clearly defined standards, positive comments regarding the progress or success of HAMP are simply not credible, and the growing public suspicion that the program is an outright failure will continue to spread.
Even David Dayen of the liberal Firedoglake isn't buying this idea that HAMP is helping out consumers:
Now, I don’t totally agree with one of his premises, that House Republicans are about to make this worse by attempting to repeal HAMP. In fact, these routine stories of servicer abuse happen inside HAMP every day, because of a program that is entirely discretionary and a Treasury Department that has to this day offered no sanctions for abusive servicer conduct or violations of program guidelines. Milbank recognizes this but can’t tear himself away from the position of many consumer advocates, that HAMP is bad but better than nothing. This relies on a pipe dream that you could actually fix HAMP and make it work for consumers; I think we’re beyond that stage.
Of course, as Stephen Spruiell noted at National Review, principled liberals such as Dayen weren't really vocal about their belief the program was a failure until late last summer when it became too obvious to ignore. So if HAMP isn't actually helping out the little guy, who benefited from the government funneling an additional $50 billion into the mortgage industry? Here's National Review's editorial from way back in February 2009 when the program was announced:
Put simply, this program is designed to benefit Fannie and Freddie shareholders, not the great majority of Americans struggling with their mortgages. The only loans that can be restructured are those held in Fannie/Freddie portfolios or securitized by the twins. Just in time to benefit from a refinancing boom, Fannie and Freddie plan to raise their fees to as high as 3.5 percent on April 1. (Note that date, taxpayers, and ask yourselves who is being played for the fool.) And only a tiny slice of homeowners will be eligible — those who are in relatively weak positions (house payments exceed 31 percent of gross income) but not too weak (house payments do not exceed 38 percent of gross income) and who are, despite their mortgage difficulties, still creditworthy enough to pass bank underwriting standards. Fannie and Freddie get new capital, new income, and better loans in their portfolios. Most homeowners get nothing, and taxpayers get the bill. Fannie and Freddie, which ought to be disbanded, will survive to continue distorting both markets and politics.
HAMP was always a GSE/bank bailout disguised a consumer protection program. Talk about insidious. The only reason the Obama administration got away with this fraud is because the Lords of Beltway Conventional Wisdom have been snookered into credulously believing the White House had good intentions at every turn. If Milbank's column is any indication, they're holding fast to this belief even as principaled liberal observers are in agreement with the right on this narrow issue.
Further, the problem is more complex than the big mortgage banks vs. the American people. You'll recall that Rick Santelli's famous CNBC rant that set the Tea Party in motion was about HAMP. Specifically, Santelli was angry over the idea that the government was going to just bail people out of their mortgages without making any effort to distinguish between those Americans that were genuinely victims of deceitful mortgage practices or those that were simply greedy and made bad investments.
"This is America! How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills? Raise their hand," Santelli said. And with that, a political movement was launched.
In fact, just about the only people that have from the beginning opposed the bank bailouts, weren't fooled by HAMP and correctly identified the problems of government distorting incentives in the mortgage markets were Tea Partiers.
Thankfully, some principled people on the left -- such as Dayen quoted above -- are coming around on HAMP and mortgage markets. They might still talk up Elizabeth Warren's Consumer FInancial Protection Bureau and other dubious government panaceas to a problem largely created by government in the first place. But that is at least an understandable point of disagreement.
Supporting HAMP is at this point is as inexplicable as it is indefensible. And Milbank's suggestion that Republicans aren't protecting consumers by wanting to kill HAMP is grossly unfair. He really ought to know better.