I gave a qualified decent review to the Democratic Party platform on the deficit and social insurance programs. I cannot come close to doing the same on housing. In fact, the platform plank on this issue is so disingenuous, it makes Paul Ryan’s convention speech look scrupulously honest. I have to go through this 285-word section line by line.
The housing plank starts off promising and then immediately undermines itself:
For more than a decade, irresponsible lenders tricked buyers into signing subprime loans while too many homeowners got in over their heads by buying homes they couldn’t afford.
Remember, you can’t talk about the largest consumer fraud in history without also blaming homeowners for buying “too much home.” When you’re talking about a systemic fraud perpetrated by lenders, trustees, financiers, appraisers, brokers, middlemen, lawyers, robo-signers and all the way up to executives at the highest levels, “irresponsible” homeowners slot in very low on my list. As I understand it, you need two sides to make a loan deal. Under normal underwriting conditions, it should be impossible for anyone “irresponsible” to try to buy a home they couldn’t afford.
Moving on, there’s a pro forma section about how everyone was hurt by the housing bubble’s collapse, even “responsible homeowners who played by the rules, but saw their home values decline and their neighbors’ houses sit vacant.” And then we hear about all the great things that the President has done to save the housing market:
President Obama took swift action to stabilize a housing market in crisis, helping five million families restructure their loans to help them stay in their homes, making it easier for families to refinance their mortgage and save hundreds of dollars a month, and giving tax credits to first-time home buyers.
Are they kidding with this? Here’s the most recent housing scorecard from HUD, from July of this year. You get to this 5 million number by counting “homeowner assistance actions,” through HAMP, and that would include trial modifications that have not been made permanent, and which could be cancelled at any time. And then you have to add loss mitigation programs at FHA and HOPE Now. The latter isn’t even the Obama Administration’s program. None of this includes the modifications that went into redefault or the trial modifications that were cancelled and squeezed the borrower by demanding the difference between the original payment and the trial modification immediately.
Remember that HAMP alone was supposed to save 4 million homes, a recognition that the other programs counted here were completely insufficient. HAMP currently has administered about 1 million permanent modifications, and about one-quarter of those have redefaulted. And they overlook the fact that less than 10% of the money appropriated to HAMP for housing relief has been spent. This section is finely crafted bullshit.
In addition, what has made it easier for families to refinance, what has driven refinance numbers, clearly has been low interest rates. Even small changes up or down in interest rates impact the frequency of refis tremendously. As for “giving tax credits to first-time home buyers,” most economists agree that was a bad thing. It was a giveaway to upper-middle class individuals who bought homes, and it just brought sales forward rather than increase the pie of sales overall.
But all of that pales in comparison to this next passage:
He also cracked down on fraudulent mortgage lenders and other abuses that contributed to the housing crisis. Democrats have held the largest financial institutions accountable by requiring them to provide relief for homeowners still struggling to pay their mortgages and to change practices that took advantage of homeowners.
The only thing that they could possibly be referring to here is the foreclosure fraud settlement. I think I’ve described this enough, including the revelation in the last week that almost all of the “consumer relief” to date has come from short sales that the industry was pursuing already, not to have to repeat myself. There was absolutely no accountability in the settlement. Period. End of sentence. There has been no “cracking down” on abuses in the housing market. Robo-signing still happens. MERS is still an operational entity. Servicing abuses still persist. Homeowners are still being taken advantage of, every single day.
Then there’s a pro forma reference to the Neighborhood Stabilization Program, which the President tries to expand in the American Jobs Act, to no avail. The NSP is such a small and insignificant program, I’m surprised they had to reach that low to find something to tout.
Then there’s the going-forward solutions section. Notice the lack of the words “principal reduction.”
Too many people still owe more on their homes than they are worth. That is why Democrats are fighting to give every responsible homeowner the chance to refinance their home, spurring investment in communities that have been hit hardest by foreclosure, and taking whatever steps we can to avoid more foreclosures. The President remains committed to creating an economy that’s built to last, where home ownership is an achievable dream for all Americans.
The Republican platform on housing at least had the honesty to reject principal reduction. The Democrats pretend it doesn’t exist. And they certainly don’t appear to show any awareness of the continuing damage caused by the mortgage industry. Republicans mentioned that they don’t want to unfairly advantage homeowners vis-a-vis renters, and they re-upped a commitment to low-income housing. There’s absolutely nothing of that here.
This platform plank borders on the offensive.