The effort itself was complex and was formulated with both federal guidelines, and guidelines to be established by each of the individual fifty states. The effort also proved to be so confusing that about six months after the its inception, FreddieMac (one of the lenders that was offering the so-called “affordability assistance” to some of its borrowers) actually hired a private firm to send trained professionals door-to-door in certain regions of the country to explain to homeowners how the program worked.
The objective of “Making Home Affordable”—reducing monthly mortgage bills so borrowers would presumably keep paying on their mortgages—was to be accomplished on a case-by-case basis, and by a variety of means. Among the optional procedures were: lowering the interest rate of the loan (to as low as 2 percent in some cases); reducing the principle on the loan; and extending the term of the loan, in some cases to a maximum of forty years.
The government stipulated that, for certain qualified mortgage holders, loans that were held by the government-controlled Fannie Mae and Freddie Mac would be refinanced or otherwise “modified” to provide the borrower with more manageable monthly terms. Not surprisingly, the government was also able to get some of the lenders who accepted “bailout funds” to follow suit, and begin modifying the loans of their struggling clients as well (even though to do so meant that these lenders would be working against their own interests, and foregoing revenues that they were clearly entitled to collect).
It all seemed like a great idea. But as is so often the case when the government intervenes into the free market, the results produced by the “Making Home Affordable” initiatives have been less than desirable. Within the first eighteen months of the program’s beginnings, more than 50 percent of the participants in the program ended up falling behind on their payments again. Our government’s well-intended effort to “solve” the mortgage default problem gave rise to an entirely new problem—the phenomenon of “re-defaults.”
And here’s another problem with the program: it focused on mortgage borrowers who were not keeping their commitments, and extended to them a benefit, while more responsible borrowers who were current on their payments received no benefit from their government at all. This is to say that, for all the good intentions involved, the “Making Home Affordable” program rewarded bad behavior – and produced more bad behavior in the end.
This is but one example of a well-intended government program that has cost the American taxpayer enormous amounts of money, has undermined hard working people who play by the rules, and has produced more negative consequences. Has it failed? Not according to our government.
The choices between big government and limited government are not inconsequential. Americans need to think, before they vote.