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Glenn Cook
Refinancing mortgages, buying votes
Updated: Oct. 31, 2011 | 11:54 a.m.
President Obama's latest housing intervention will not prevent foreclosures, lift the housing market or boost the economic recovery, even though he promised as much Monday in Las Vegas.
Not even he believes a single, small executive decision can work such miracles.
No, his administration's expansion of the Home Affordable Refinance Program is about one thing, and one thing only: beating likely Republican nominee Mitt Romney in Nevada and other states with depressed real estate markets one year from now.
It's not a coincidence that both Obama and Romney made defining remarks on housing policy in Las Vegas this month. Southern Nevada is ground zero in the country's housing collapse, with roughly three-quarters of its homeowners anchored by negative equity.
Nevada is also one of the most important battleground states in the 2012 presidential election. Because of voter-registration margins, historic voting trends and current political realities, the outcome of next year's presidential vote is already all but locked up in more than 40 states, according to Larry Sabato, director of the University of Virginia Center for Politics. Writing in The Wall Street Journal last month, Sabato predicted Obama's re-election will come down to just seven "super-swing" states with 85 total Electoral College votes: Colorado (9), Florida (29), Iowa (6), Nevada (6), New Hampshire (4), Ohio (18) and Virginia (13).
The stakes here are as big as our housing troubles.
In a meeting with the Review-Journal's editorial board Oct. 17, Romney called for an end to the interventions and misguided rescue plans that have distorted the housing market and delayed its recovery.
The collapse in home values has been driven by the glut of foreclosure resales. Foreclosures are driven by job losses.
Romney said job growth is the only way to boost demand for housing, lift values and halt the tide of foreclosures. And to create private-sector jobs, Romney said, the country needs to adopt a favorable, certain tax structure; end federal deficit spending; and encourage investment by ceasing government hostility toward businesses.
Modifying or writing down mortgages -- as various Obama initiatives did without reversing the housing slide -- doesn't help if the homeowner has no income. Most modified mortgages end up defaulting again anyway.
"Bailing out homeowners one by one simply hasn't worked. ... Don't try and stop the foreclosure process," Romney said. "Let it run its course and hit the bottom."
Romney's comments went viral, and Democrats pounced. Senate Majority Leader Harry Reid of Nevada went so far as to demand that Romney apologize to "the thousands of Nevada families struggling to keep a roof over their heads." The Democratic National Committee began running advertisements ripping Romney for having the audacity to suggest that people who aren't paying their mortgages can't stay in their houses forever.
One problem: Obama can't claim that any of his economic policies have helped Nevada, considering its nation-leading unemployment and foreclosure rates and its bleak prospects for short-term growth. And most voters here won't soon forget Obama's two separate admonitions to Americans to not waste their money in Las Vegas.
So on Monday, Obama did the only thing he could do: He promised to deliver more taxpayer-backed swag.
HARP, as originally structured, was intended to refinance 5 million underwater mortgages, but fewer than 1 million homeowners have been able to take advantage. Only homeowners with mortgages held by federally backed Fannie Mae and Freddie Mac were eligible, and loans had to be worth 125 percent of a home's value or less. Lenders wouldn't give favorable refinancing terms to underwater homeowners, anyway. It was worthless to Nevada, where large numbers of homes are worth half what's owed on them.
All this fueled resentment among a growing, diverse class of voters: the suckers who have stayed current on their mortgages, are well over 25 percent underwater and can never escape advertisements touting record-low interest rates. These old-school citizens know people who've lived in their houses for more than a year without making a mortgage payment.
Obama's latest plan is aimed squarely at this bloc -- and it's a huge one in Clark County, comprising Democrats and Republicans, tea partiers and nonpartisans. Now people holding federally backed mortgages will be able to refinance through HARP no matter how far underwater they are -- as long as they're current on payments -- and a lot of homeowners will qualify to have fees and appraisals waived. The banks are playing ball because Fannie and Freddie (meaning taxpayers) will take the loss if a mortgage refinanced through HARP defaults.
Bank own your mortgage? Behind in your payments? Then tough luck.
Those who qualify for a HARP refinance will have to make a choice. They can reduce their monthly mortgage payment, perhaps by hundreds of dollars, but reset the amortization table on a 30-year term, putting them on an even slower path to getting above water unless they apply their savings to principal. Or they can refinance to a 15-year term to more quickly pay their way back into equity.
This doesn't "stop the foreclosure process," as Democrats have suggested they favor by attacking Romney. Homes in the foreclosure pipeline will stay there. Those who do refinance through HARP get no immunity from foreclosure if they lose their job and can't pay the mortgage. If a few million people are able to refinance and pour their monthly mortgage payment savings into the economy, the impact would be just a few billion dollars -- far less than the losses investors, including pension funds, would sustain from having so many performing mortgages paid off early.
No net benefit to the economy. No jobs to boost demand for housing. More liability for Fannie and Freddie.
Romney is right. The meddling has to stop. But for Obama, the opportunity to buy a few more votes at your expense, the chance to say he did something no matter how futile, is too tempting to pass up.
In a battleground state like Nevada, that just might be enough.
Glenn Cook (gcook@reviewjournal.com) is a Review-Journal editorial writer.
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Glenn.Koons...to go one step further, who will benefit from this.. O'Drama. That is the sole reason for the act. Increase electability.
In America, traditionally there has been no barriers to anyone willing to work hard and move up. Challenges and setbacks sure.
In the same tradition there can be no barriers for those that try and fail, to hit bottom. No guarantees of success, no guarantees of property ownership or free education from a University. Play the hand you are dealt and make the most of it.
Buying votes is the Mission Statement of the Democratic party. Has been since at least the Civil Rights act of the 60's. From paying for illegitimate babies, Welfare for nothing, promise to absorb student loans, making property ownership a "right'. to paying for abortions and building Recreation centers in every elected officials district. They invest in the future, theirs. Re-election and backroom deals to create wealth is the personal agenda. Harry Greed has been on the public payroll his entire life.
In that time of working for the people he has amassed a personal fortune. How does a working man do that on a salary? Further, while he has had the brilliant business accumen to accumulate wealth in his personal life, his job related performance is pretty poor. While he has been one of the members of the Senate our Nation has gone bankrupt. How do you reconcile that. A man so sharp at business that he can amass a personal fortune while on a salary, yet given unlimited access to unknown quantities of tax money runs the USA into bankruptcy? Just doesn't make sense.
@dennis.gergen, next time you type a long comment, only to realize you are not signed in, just copy and then sign in and when the screen returns, paste. Happens to me all the time.
Hank: no I am suggesting that these are pure bribes for votes. Period. They will not do much for the supposed recipients. The ones who will take advantage of these bribes are people who are tweeners; as to who they blame for their problems. So some will go with Bama though Dems have controlled the economy now for 3 yrs. and every vote counts when struggling for your political lives.
There are 2 stories here! One are the people that sold at the top of the real estate bubble. Second are those that bought at the top. You have success and failure in the same transaction. Today we are dealing with the suckers. They bought at the top expecting continual evaluation of their investment. The market crapped out and now they are holding the bag. What to do? They took a chance and failed, now the inevitable must happen. Walk away or stay and pay. My opinion is that Romney is right, let it collapse and then rebound on its own. Isn't America a great country!
@Glenn, At least you got the Yikes part right. Just to clarify, are you trying to suggest that if qualified mods promised in that $75 Billion are FINALLY BEING PROCESSED, that's called Phoney Mortgages? No Sir, most sane Americans call that FISCAL ACCOUNTABILITY-- for the homeowners it saves. And the banks who've been HOLDING ONTO all THAT $$$$$$$$$$$$...for safe keeping I don't wonder. Or would you prefer the banks just keep that $50 Billion while homeowners watch the "market correct" from their rented apartments? I tell you, they broke the mold with this new breed of tea guzzlin' Pubs....We can only hope.
So we have bribes already: student loans and phony mortgages ala the old Fannie-Freddie Barney-Chris ploy. Yikes. Bad enough that Bama said today, how obstructionist the Pubs were while Dems controlled the Senate and WH!! BTW, there are 15 eco. bills that Reid in the Senate will not bring up for a vote that Pubs passed in the House. Enough. This Admin. has to go; all of them via House and Senate offices.
@Athos, I don't. But I do know a lot of pre-qualified people who tried to take advantage of this program--dozens--and got turned back 99% of the way through the process. DOZENS. THIS cycle of "You Qualify!...Ooops, Sorry, You don't!"
was the banks' (newest ) blatant way of keeping all that money. THIS was the Obama-touted and tax-payer-funded scam/cluster-**ck to rival anything Wall Street's come up with yet. Were it not for this sudden push to re-up the program,
and granted, a shameless & entirely predictable vote-seeking ploy, the banks would be counting that $50 Billion in their Christmas Bonuses. You'll notice our President's not a 'Details' kinda guy. Yet with the current tweaking of parameters, and the
administration's Sudden Motivation to make this Work for 'the
American People', those people need to go back, if they truly want to keep their homes, and try again. And again. And even Again for the mods they're qualified to receive and that their tax-dollars paid for. FACT: Somebody's going to get that $50 Billion. For once, not one dime of it should go to anyone but the Homeowners who paid for it in the first Place! For those committed to staying in this valley, there's that, or leaving it to the ever fortunate greedy bankers and lucky, largely foreign investors, who sometimes pay as little as $0.10 on the original dollar, to gladly decimate what was for many their life's investment. Sorry Athos but 'Cut and run' may work for some,
For many others, Bending over while the market "corrects"
instead of demanding the help promised by OB/HARP is just a bad idea good people needn't follow. If the banks could robo-sign thru millions of illegal foreclosures, they can bloody well man-up and staff for round-the-clock processing of Qualified mortgage mods now...At last a golden opportunity to do what they were RICHLY PAID to do. With Homeowners' tax dollars.
I wasn't signed in so lost all I wrote I guess but briefly I stated something like: It seems to me that the author is just another one of those individuals who complains about Obama without really having any meaningful alternate way suggested as how to turn the economy around. I personally believe the government should fight this recession like it did the enemy in the second world war. That was done with massive government indebetedness to hire almost everyone to work in the defense plants. People were buying war bonds and many other things. Once the economy turns around will then be the time to pay off the national debt and restore the social security funds. Hopefully after the present experience most will insist the government start educating our children in government, politics, family life,banking, free enterprise system, socialistic ideas such as highways, postal systems ,criminal law, social security, national health care, and how important it is for the government to pay off the national debt and in good times to accumulate funds that indicate our government can handle future economic set backs. Once we have greatly improved our social problems then it hopefully would be a time to consider cutting taxes. I am concerned that if the vast number of poor keep getting more and more and more poor and the rich keep getting more and more rich we will eventually have a revolutionary environment where a military take over or even a dictatorship will possibly be established. I personally don't blame people for trying to relocate to have a better life for themselves and their family, just maybe once we do better for ourselves we can do more to assist others but then that is another story.
We also have the newest and greatest lie.. We are now going to buy votes with the new student loan program "that will not cost the taxpayer a dime". Right. I can punch a calculator for 30 seconds and know that is a lie. But even better... they up the ante and say that it will save us money in the long run. We have already spent 5 trillion dollars in 36 months on programs that will eventually save us money. One more year to the election. Can't come soon enough.