This blog was coaxed into existence by the public policy response to the Housing Crash.  The Government's reaction to the economic crisis has had little chance of resolving the downturn, but has extended and worsened the malaise at extraordinary financial expense.

The Obama Administration’s HAMP foreclosure prevention program is a sad chapter in the Government’s ongoing and misguided response.

Background

TheAMD.com has observed since its first post (based on an understanding of the fundamental forces which created and are sustaining the downturn) that efforts to prop up housing prices would fail and worsen our economic predicament.

Response to WSJ article "First, Let's Stabilize Home Prices" - 10/2/08

“Any action which would attempt or have the effect to prop up housing prices at an artificial value, though, is counterproductive.  Such initiatives will only lengthen, deepen and increase the damage caused by the inevitable march to a sustainable equilibrium”

More specifically, TheAMD.com has observed that Government sponsored foreclosure efforts were futile and counter-productive.

The Next Government Created Housing Disaster – 11/5/08

“The proposed foreclosure bail-out erects a long-term, structural impediment to a housing recovery.  Government intervention which delays the resolution of these distressed homes will extend the housing downturn as long as inevitable foreclosures are artificially excluded from the market”

Modifying Impending Foreclosures DOES NOT WORK! – 12/8/08

“Government efforts do not prevent foreclosures, they simply delay them to disastrous effect.  The length of the downturn is extended and taxpayers are on the hook for inevitable losses.  The government appears committed to perpetuating the credit, consumer spending and foreclosure death spiral which it created.

Foreclosures and falling house prices are inevitable.  What is not yet determined is the duration of the downturn or its severity.  Let the market work and we will experience a few years of unavoidable pain.  Allow the government to prevent the markets from operating and we will be lucky to only lose a decade.”

HAMP was implemented despite protestations, but this venue did note that the Obama plan would be ineffective and harmful.

Obama's Foreclosure-Prevention Plan Will Lengthen the Depression by Years – 3/5/09

“The only real effect of the proposed foreclosure prevention policy is to slow down but not prevent price declines, delay inevitable foreclosures, lengthen the economic downturn, extend institutionalized barriers to a housing recovery by several years, and expose taxpayers to horrific losses as prices continue to fall, defaults accelerate and refinanced mortgages fail.”

After a year of economic damage a consensus has finally emerged that HAMP is an unmitigated disaster.

Obama Loan-Modification Effort "Failed Miserably," Panel Says – 3/25/10

March 25 (Bloomberg/Business Week) – “President Barack Obama’s main foreclosure-prevention program is a failed effort that may be doing more harm than good by spreading the housing crisis over several years, lawmakers and a U.S. watchdog said today”

A day after the above article appeared, and undeterred by repeated failure, the Obama Administration launched a new effort which will further extend the economic downturn.

Take two: Gov't tries new fix for mortgage crisis – 3/26/08

“The government's bold new plan to stem the foreclosure crisis aims to succeed where previous efforts have fallen flat.  Yet just as before, the odds are long, and many struggling borrowers won't qualify.”

The new plan includes using the FHA to refinance underwater mortgages so that taxpayers are liable for the defaults which will inevitably follow.  The FHA, the primary entity being misused by the Government in a futile attempt to prop up housing prices, will take on these toxic mortgages. 

It is already inevitable that the FHA will fail resulting in a taxpayer bailout of extraordinary expense.  The Obama Administration is consciously choosing to accelerate this event, and make it more costly, by issuing mortgages that no sane business entity with solvency as a concern would ever consider.  (The opportunity is still available to join TheAMD.com’s “When Will the FHA Fail Contest” – 4/3/09)

Any effort to resolve the housing disaster through the write-down of mortgage principle will fail and have the unintended, but predictable, effect of undermining performing mortgages.  If the Government really wants to create a spectacular economic disaster it will continue down the mortgage principle reduction path favored by the economically challenged New York Times.


Historical Perspective

One of the primary themes of this blog is the historical, economic and political parallels between The Affordable Mortgage Depression and The Great Depression.  In my studied opinion the similarities are striking. 

The following quote is eerily reminiscient of FDR’s philosophy during The Great Depression.  The comment on HAMP by Representative Jackie Speier, a California Democrat, also nicely encapsulates the Obama Administration’s economic strategy.

“Unfortunately we are incapable of saying that it was a failure, it was an experiment, it didn’t work, let’s try something else.”

FDR quote from May 1932:

"The country needs, and unless I mistake its temper, the country demands, bold, persistent experimentation. It is common sense to take a method and try it; if it fails, admit it frankly and try another. But above all, try something."
 
The Great Depression would continue and intensify for years under this approach.