Why Are Obama’s Housing Initiatives Now Going to Congress?

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President Obama’s speech to a joint session of Congress in September (remember the prime time squabble with Boehner? that one, the jobs bill) mentioned executive action to address the grindingly dysfunctional post-bust housing market. In my blog post here, that proposal seemed like the more important topic in the whole speech. Just days before, my blog post here highlighted the failure to effectively address the housing debacle as a major weight holding back recovery in the overall economy.

Now we read that these same proposals are headed to the irreparably dysfunctional Congress, presumably to give Congressional staff something with which they may line the bottoms of their bird cages. So … uh … what the hell happened?

I must admit that I have a personal iron in this fire. When I was run out of my previous church (and the housing they provided), I pretty much had to buy a house. The problem? This was Spring, 2005. Yeah. Houses were being sold within hours of listing. Hours. Seriously crazy.

We bought this house within hours of it being listed, and we bid the price UP an additional $5,000 from the asking price. Oh, yeah. We were the first ones to see it, thanks to our agent. The couple after us made the identical upgraded offer. We bid first so we got the house. With only $10k down, this was a “sub-prime” mortgage; $140,000 on a 30 year fixed mortgage at 5.875%. Freddie Mac bought the mortgage from the originator and assigned it to Wells Fargo to manage.

Fast forward: Fall, 2011, the TRIM notice arrives from the county appraiser’s office; home value now $100,800 for tax purposes (in 2007, it was $174,000). The mortgage balance is about $126,000. We’ve never missed a payment in 6 ½ years and have a 785 credit score.

While we aren’t going anywhere right away, the math on recovering anything of value is not pretty in the next 5 years, maybe 10 years. The development in which we live has been a “foreclosure farm.” This kind of housing mess has millions of people trapped and that hurts the economic recovery.

It would be great to take advantage of current low mortgage interest rates (like the bankers) and refinance. With 15 year fixed rates at 3.25%, holy crap! We could make the same payment and surface from being underwater fairly quickly.

I checked with the Federal Home Finance Agency (FHFA) designated mortgage agents for Florida. No, we probably wouldn’t qualify for HARP refinance. HARP  – Home Affordable Refinance Program – is one of two Obama programs to address the housing crisis that hasn’t worked too well. (HAMP – Home Affordable Modification Program – is the other lackluster attempt.) HARP requires a 125% LTV (loan-to-value) at worst. That means the mortgage cannot be greater than 125% of the appraised value of the home. Likely the county TRIM overvalued the home, meaning we would probably fall just outside the 125% LTV after paying for a formal private appraisal.

Yes, they said there were supposed to be new rules coming out from FHFA on HARP; maybe in March, 2012.

Now it seems this whole deal is headed to the moron menagerie often called Congress. Since it was within executive authority to make HARP and HAMP better, loosening the rules and making the bailed out, taxpayer-owned royal turds – Fannie and Freddie – even take a bit of a haircut to fix the mess to which they clearly contributed and from which their execs so richly profited … and continue to benefit from millions of good, high interest-paying, peon-schlunks like us, I ask more loudly: What the hell happened?!

Edward DeMarco.

DeMarco is the Acting Director of FHFA, the government agency formed to oversee Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks when these semi-private entities choked on a bundle of bad debts and needed a massive taxpayer Heimlich, like $200 billion in federal guarantees as part of the government takeover. According to his FHFA bio, DeMarco was appointed in Fall, 2009 as Acting Director which he remains, with an emphasis on “Acting.” (Why he is still Acting Director after 2+ years is a reflection of the DC donut holes who would likely have to confirm him (or anyone else) as “Director.”)

DeMarco is clearly a smart man, but he is a career Washington economic bureaucrat. He has been groomed in CYA (cover yer arse) for decades. He believes in keeping an even keel, doing the job as the description has been written. Nothing more or less. And you definitely don’t rock the boat which would mean departing from said job description. Listen to his interview with NPR’s Morning Edition today, click here.

DeMarco issued vague statements in September, like this one:

“If there are frictions associated with the origination of HARP loans that can be eased while still achieving the program’s intent of assisting borrowers and reducing credit risk for the Enterprises, we will seek to do so,” he added.

Translation from bureaucratese: “This kind of change gives me heartburn … bad.”

An 8 page October press release with FAQs promised news in mid-November; looking good, it seems … seems.

Push back came from the left because he wasn’t doing more. A video at the end of the linked article shows was some push back evident from the right.

By mid-November, the obstacle machine was in full gear as this article talks about problems with taxes, securitizations, etc. HARP 2.0 seemed headed into the oblivion of HARP 2.NO.

In January, 2012, the blockers breathed a sigh of relief as this occurred:

In a letter … the Federal Housing Finance Agency explained [to a congressional panel] … that such reductions would be more costly for the two firms than allowing those troubled borrowers to default.

Ouch; he really said that? Default? And then:

“FHFA has a statutory responsibility as conservator to preserve and conserve the assets and property of the regulated entities,” FHFA’s acting director, Edward DeMarco, wrote in the letter to lawmakers dated January 20.

Translation of bureaucratese: “Ain’t doing squat.”

The idea for the Obama administration to be done with Edward DeMarc-no and make a recess appointment a la Richard Cordray was only possible among the deluded rumor-mongers at American Enterprise Institute, i.e. not a hint of reality. Too bad.

The magical recess appointment could have moved the housing fiasco beyond DeMarco’s defensiveness and into the hands of someone who actually wanted to address the problems in housing and housing finance.

Instead, we get Congress. Great. I’ll be staying underwater, paying this mortgage until I die. Yeah, literally. I’m working on growing gills now, see:

Graphic credits:

American Gothic House Underwater at Freakingnews.com by Mandrak

Edward DeMarco from FHFA acting director bio page

Creature from the Black Lagoon bearing my remarkable likeness, from Screenrant.com