When he announced he was running for president, Obama instantly became the news media and Hollywood’s darling, the John F. Kennedy of his generation. But reality is much different than fiction and President Obama may go down in history as having one of the most failed administrations. Despite his poor track record of government spending to heal a sickly America, Obama announced yet another government program this week.
Under the auspices of We Can't Wait, Obama announced Home Affordable Refinance Program (HARP) in Las Vegas, the nation’s foreclosure capitol. HARP is supposed to help homeowners with loans backed by Freddie and Fannie refinance to lower rates, even if borrowers are underwater on their mortgages—owing more than the homes are worth.
This newest and biggest idea from team Obama won’t work because his $50 billion Home Affordable Modification Program known as HAMP didn’t work either. Obama boasted HAMP would prevent 4 million Americans avoid foreclosure with lower monthly payments. To date Treasury claims about 700,000 have been helped but the default rate for HAMP borrowers was estimated to be as high as 65%.
The problem is most of these people should never have had these loans in the first place and the government sponsored enterprises Fannie and Freddie fueled the housing crisis by encouraging lax lending. Instead of putting a band aid on a problem, the Obama administration should allow the foreclosure process to work itself through. Fannie and Freddie are also part of the problem. Both own 70% of all home loans; taxpayers had to bail them out to the tune of $160 million and if they refinance these bad loans under HARP, taxpayers will be on the hook for more money because these borrowers will likely demonstrate a high risk of default like their HAMP peers.
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