By any measure, the so-called Home Affordable Refinance Program has been a dismal flop, with only an estimated 200,000 or so distressed homeowners managing to get a permanent mortgage loan modification from their lenders. Not anywhere near the roughly 5 million homeowners the Obama administration originally said it hoped would be helped by the program.
On the Federal Housing Finance Agency web site late Monday, Acting Director Ed DeMarco is quoted as saying, " FHFA has reviewed the current market situation and the state of mortgage insurance availability and has determined that the market conditions that necessitated the action taken last year have not materially changed."
According to eCreditDaily.com, Fannie Mae president Michael J. Williams says of the White House instigated extension, "Thousands of families have already received much needed relief...extending HARP for another year will enable us to help even more families." Of course, what Williams neglects to say is that while it is true that "thousands of families" have gotten relief, millions more have not! The program is administered by both Freddie Mac and Fannie Mae, usually referred to as the "government sponsored mortgage finance companies." Truth is, both are actually more like taxpayer-owned mortgage finance companies that happen to be losing lots and lots of that taxpayer money.
This program, I should point out, is supposed to help borrowers who are, as they say, "underwater" -- whose homes are now worth less than their mortgages.
Lots of excuses have been given for why the program has failed so badly -- and, make no mistake about it., it has failed. There were lender delays, computer software screw-ups and, complicating everything, the fact that many homeowners already have a second mortgage, which makes everything more complicated than it probably needs to be.
But the real issue I --and others---have said over and over and over and over and over and over again, is that any program of mortgage refinancing that relies upon lowering interest payments while leaving principal untouched is , in the long run, doomed to failure. People are out of work, or worried they soon will be. Those who are working might have had their paychecks reduced as hours and overtime have been cut. Paying lower interest rates over a longer period of time is not going to solve the problem.
As I have also said before, President Obama understands this well. He, in fact, was an early backer of changing the laws to allow bankruptcy judges, in certain cases, to reduce mortgage loan principal so that distressed homeowners would be able to gain equity in their property. He backed away from that stance once in office and once the powerful banking lobby did a number apparently on both the White House and the Congress.
So, a one-year extension of a failed program? Don't count on this to fix our economy, mend our real estate market or keep people from losing their homes.
Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate related issues for several years.