From the WSJ:
The U.S. housing market is still wheezing: The Case Shiller home-price index has fallen for five consecutive months and 22.5% of all residential properties with a mortgage are in negative equity, according to CoreLogic’s latest data. Bank foreclosures are expected to accelerate, and prices in many markets still haven’t touched bottom. The Obama Administration’s solution? Prolong the pain.
The latest attempt at housing market masochism was reported in a page one story in this newspaper last week. Details are sketchy, but the idea seems to be to force the nation’s biggest mortgage servicers to cough up $20 billion for principal write downs on “underwater” mortgages, in which borrowers owe more than their homes are worth. The money would be extorted as part of a settlement for the mortgage foreclosure kerfuffle of last year. Bank of America, Wells Fargo and J.P. Morgan Chase would likely be among the hardest hit.
This smells like a re-run of the failed Home Affordable Modification Program, or Hamp. Launched in 2009, Hamp was supposed to keep homeowners in their homes. Instead, the program swamped mortgage servicers as debtors rushed for the goodies, gummed up the foreclosure process and left some borrowers worse off. Special Inspector General for the Troubled Asset Relief Program, Neil Barofsky, said in January that Hamp falls “dramatically short of any meaningful standard of success.”
The larger context here is that Americans are figuring out that the multiple government programs to prop up the housing market have only postponed the day of recovery. They have given homeowners the false hope that they can stay in homes they can’t afford, delayed foreclosures that are probably inevitable, and prevented prices from finding a bottom.
Better news for the housing market is coming from Congress, where House Republicans are moving to dump Hamp. Mr. Geithner played the recession scare card yesterday by telling a House committee that closing Hamp would “cause a huge amount of damage” to the economy. But Mr. Geithner has had two years to make a difference with Hamp, and he’s done more harm than good.