Intentions Don't Matter. Results Do.

by Pejman Yousefzadeh on January 2, 2010

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To wit:

The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.

As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”

Read on, and you will see that despite a brave public face, claiming that the program is doing its job, Treasury officials are privately admitting that it is a giant failure. Read on some more, and you will find that some of the people who qualified for loan modifications found out about their “good fortune” only after having been informed that their homes had been foreclosed upon, and sold at auction. Havoc has been wreaked on the lives of individuals, and on a macro level, the loan modification program is a total failure.

Heckuva job, Obama Administration.

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