This strikes me as the sort of policy the Left would go berserk over if a wealthy Republican – like say, Mitt Romney – came up with the idea. But when Obama does it it’s all good, I guess. Never mind that HAMP has been a bureaucratic nightmare since its inception in 2009, and has done little if anything to stabilize the housing market. It’s full speed ahead anyway with HAMP 2.0, which now also aims to assist not only struggling homeowners but also landlords and so-called speculators by subsidizing bank loans, artificially lowering interest rates, rewriting private contracts, and even outright forgiving principal in some cases.
Maybe it’ll all work out better this time around.
The Obama administration will extend mortgage assistance for the first time to investors who bought multiple homes before the market imploded, helping some speculators who drove up prices and inflated the housing bubble.
Landlords can qualify for up to four federally-subsidized loan workouts starting around May, as long as they rent out each house or have plans to fill them, under the revamped Home Affordable Modification Program, also known as HAMP, according to Timothy Massad, the Treasury’s assistant secretary for financial stability. The program pays banks to reduce monthly payments by cutting interest rates, stretching terms, and forgiving principal.
The government’s need to protect neighborhoods from blight and renters from eviction, by keeping the current owners in place is outweighing concern that taxpayers will end up bailing out real-estate investors. The program is being enlarged after less than 1 million borrowers modified loans through HAMP, compared with the administration’s stated goal in 2009 of helping 3 million to 4 million homeowners.
“When we started the program we focused on owner-occupied houses because the need was so great and we wanted to target the efforts to that group,” said Massad. “Given where we are today, more and more people recognize that vacant properties are a problem no matter how they became vacant.”
John Burns, an Irvine, California-based real estate consultant, said it’s “ridiculous” for taxpayers to come to the aid of individuals who made bad bets.
“What kind of precedent are you going to set?,” Burns said. “Are you going to refund people who lost money on the stock market too?”
Government help to homeowners comes after President George W. Bush’s administration rescued banks with the Troubled Asset Relief Program in 2008, when the housing crash sparked the worst financial crisis since the Great Depression. Wall Street benefited from Federal Reserve emergency programs to keep credit flowing, while Bush and President Barack Obama directed federal money to save companies including General Motors Co. (GM) and Chrysler Group LLC. The Obama administration then pursued a series of programs meant to reduce foreclosures.
John Russell, 61, of Northville, Michigan, said he was never a speculator seeking to flip houses. He bought four rental properties in neighborhoods in the state more than 10 years ago and said he planned to keep them for decades more. Now the houses are worth far less than he owes, his rents have tumbled, and he has to spend about $20,000 a year to keep them operating.