Help Coming for Homeowners?

— By Kevin Drum

The Obamaadministration's program to address home foreclosures, HAMP, has been apretty dismal failure. Only a small fraction of the money allocated to help homeowners has been spent and only a few hundred thousand loans have been modified. So what's next? James Pethokoukis passes along the latest dirt:

Main Street may be about to get its own gigantic bailout. Rumors arerunning wild from Washington to Wall Street that the Obamaadministration is about to order government-controlled lenders FannieMae and Freddie Mac to forgive a portion of the mortgage debt ofmillions of Americans who owe more than what their homes are worth. Anestimated 15 million U.S. mortgages — one in five — are underwater withnegative equity of some $800 billion. Recall that on Christmas Eve2009, the Treasury Department waived a $400 billion limit on financialassistance to Fannie and Freddie, pledging unlimited help. The actualvehicle for the bailout could be the Bush-era Home Affordable RefinanceProgram, or HARP, a sister program to Obama’s loan modification effort.HARP was just extended through June 30, 2011.
....Keep in mind the political and economic context. The nascentrecovery is already running out of steam....The president’s approvalratings are continuing to erode, as are Democratic election polls.Democrats are in real danger of losing the House and almost losing theSenate. The mortgage Hail Mary would be a last-gasp effort to preventthis from happening and to save the Obama agenda. The politicalcalculation is that the number of grateful Americans would be greaterthan those offended that they — and their children and theirgrandchildren — would be paying for someone else’s mortgage woes.

Maybe this happens, maybe it doesn't. But it would sure be an improvement over spending the money on "foreclosure mills," as Fannie and Freddie do now:

The business model is simple: to tear through cases as quickly aspossible. (Stern's company handled 70,382 foreclosures in 2009 alone.)This breakneck pace stems from how the mills get paid. Rather thanbilling hourly, they receive a predetermined flat fee for theforeclosure — typically around $1,000 — plus add-ons for each of therelated services. The more they foreclose, the more they make. As aresult, consumer attorneys and legal experts say, even families whohave been foreclosed upon illegally—and who can afford to make good ontheir mortgages—end up getting steamrolled. "It's 'How fast can I turnthis file?'" says Ira Rheingold, executive director of the NationalAssociation of Consumer Advocates in Washington, DC. "For these guys,the law is irrelevant, the process is irrelevant, the substance isirrelevant."

That's from Andy Kroll. Read the whole thing.

Kevin Drum is a political blogger for Mother Jones.