The Obama administration today announced that — as part of its new push to boost the economy using measures that don’t require congressional approval — it’s going to overhaul its mortgage refinancing program known as HARP. The program is aimed at helping people who are underwater on their mortgages, meaning they owe more on their mortgage than their house is currently worth.
Previously, the program was only open to those who were more than 25 percent underwater, but the administration is now opening the program to anyone with an underwater mortgage, “so long as they have made at least six consecutive monthly mortgage payments.” And more help for troubled homeowners is certainly a welcome development, as the administration’s signature foreclosure prevention program — the Home Affordable Modification Program (HAMP) — has flopped.
In fact, as the Washington Post noted today, just 5 percent of the money dedicated to HAMP has even been spent:
President Obama pledged at the beginning of his term to boost the nation’s crippled housing market and help as many as 9 million homeowners avoid losing their homes to foreclosure.
Nearly three years later, it hasn’t worked out. Obama has spent just $2.4 billion of the $50 billion he promised. The initiatives he announced have helped 1.7 million people. Housing prices remain near a crisis low. Millions of people are deeply indebted, owing more than their properties are worth, and many have lost their homes to foreclosure or are likely to do so. Economists increasingly say that, as a result, Americans are too scared to spend money, depriving the economy of its traditional engine of growth.
HARP, meanwhile, which is the program that the administration overhauled, was supposed to help 5 million homeowners, but hasn’t even reached 1 million yet.
Refinancing mortgages is all well and good, and will be helpful to those homeowners who can take advantage of the program, but it still isn’t a big bold fix for housing. The administration is still reluctant to take on the big banks by finding a way to encourage writing down principal (literally eliminating outstanding mortgage debt), even though doing so could be a serious job creator. And there is, seemingly, plenty of money with which to start new programs, since the money dedicated to HAMP has yet to go out the door.