WRONG
TURN
election, Florida, Nevada and Colorado, are among those hardesthit by the housing crisis.
Given the magnitude of the problem — a housing bubble inflated
to planet-size by Wall Street and
mortgage brokers, combined with
many homeowners content to not
ask too many questions — there’s
probably nothing Obama could
have done to fully prevent what
was coming. But if Obama loses a
close election to Mitt Romney in a
campaign defined by the Republican challenger as a referendum on
Obama’s economic stewardship, the
president’s handling of the housing
crisis might be to blame.
So what went wrong? Rather
than meet the home foreclosure
crisis with overwhelming force,
as he had attempted to do with
the $787 billion stimulus, Obama
went with a hastily-constructed
program created by his Treasury
Department that attempted to
walk the line between tough standards meant to keep irresponsible
homeowners from benefitting and
meaningful homeowner relief.
The relief plan was flawed
from the start. Rather than buy
up troubled mortgages directly
— or provide tough oversight and
strong penalties for noncompli-
HUFFINGTON
11.04.12
ance — the Treasury Department
provided modest “incentive” payments and then watched from the
sidelines as the mortgage companies botched the handling of hundreds of thousands of loans.
The plan also did little to address the financial hazard of
plunging home prices, even
though the president succinctly
described the economic quandary
underwater borrowers face: “You
can’t afford to leave and you can’t
afford to stay,” he said in Arizona.
Yet instead of offering a plan
that would have allowed people to
write off some of the inflated debt
that they owed, the president announced that the huge mortgage
companies the government had
just bailed out — Fannie Mae and
Freddie Mac — would relax their
rules about who could refinance at
a lower interest rate.
This is like acknowledging that
the river is about to overtop the
levee, and suggesting that people
stand on a single sandbag to avoid
getting washed away. An interest
rate reduction lowers mortgage
payments, which for some borrowers, can indeed mean the difference
between foreclosure and keeping
a home. But it does nothing to address the underlying problem that