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Backgrounder On The Housing Crisis And Failure Of Obama’s Housing Programs

RNC Communications - October 24, 2011

“On Monday, Obama Is Set To Travel To The Foreclosure Capital Of The Nation, Nevada, Where Most Borrowers Are Underwater.”  (Zachary A. Goldfarb, “Obama’s Efforts To Aid Homeowners, Boost Housing Market Fall Far Short Of Goals,” The Washington Post, 10/23/11)

President Obama’s Housing Programs Have Spent Only $2.4 Billion Of The $50 Billion Allocated, And Only Helped 1.7 Million Avoid Foreclosure Of The 9 Million Homeowners Obama Promised. “President Obama pledged at the beginning of his term to boost the nation’s crippled housing market and help as many as 9 million homeowners avoid losing their homes to foreclosure. Nearly three years later, it hasn’t worked out. Obama has spent just $2.4 billion of the $50 billion he promised. The initiatives he announced have helped 1.7 million people.” (Zachary A. Goldfarb, “Obama’s Efforts To Aid Homeowners, Boost Housing Market Fall Far Short Of Goals,” The Washington Post, 10/23/11)

  • The Obama Administration “Decided Against More Dramatic Actions” And “Consistently Unveiled Programs That Underperformed.” “The Obama effort fell short in part because the president and his senior advisers, after a series of internal debates, decided against more dramatic actions to help homeowners, worried that they would pose risks for taxpayers and the economy, according to numerous current and former officials. They consistently unveiled programs that underperformed, did little to reduce mortgage debts owed by ordinary Americans and rejected a get-tough approach with banks.” (Zachary A. Goldfarb, “Obama’s Efforts To Aid Homeowners, Boost Housing Market Fall Far Short Of Goals,” The Washington Post, 10/23/11)
  • The Obama Administration Was “Outraged” And “Didn’t Want To Hear It” When Warned That Their Programs Would Do Too Little To Help Homeowners. “Days before the program’s unveiling, David Moffett, the chief executive of housing finance giant Freddie Mac, arrived at the White House with a last-minute warning: Freddie’s analysts had concluded that the proposals were unlikely to help the millions Obama hoped. But, he recalled, the White House didn’t want to hear it. ‘They were a little outraged,’ Moffett said, adding that he was told, ‘We need a strong set of numbers.’” (Zachary A. Goldfarb, “Obama’s Efforts To Aid Homeowners, Boost Housing Market Fall Far Short Of Goals,” The Washington Post, 10/23/11)
  • Geithner “Did Not Seem To Embrace All Aspects Of [His] Role” As The Administration’s Point-Man On Housing Policy. “With the housing crisis so intertwined with the financial crisis and recession, Geith­ner came to play one of the administration’s most prominent roles in overseeing and formulating its housing policies. But the secretary did not seem to embrace all aspects of this role. Geithner met periodically with housing groups at the Treasury Department, but when his communications advisers raised the idea of him holding more public homeowner events at housing counseling centers or similar locations, Geithner said he did not want to spend his time on purely symbolic gestures.” (Zachary A. Goldfarb, “Obama’s Efforts To Aid Homeowners, Boost Housing Market Fall Far Short Of Goals,” The Washington Post, 10/23/11)
  •  “To Date, Administration Programs Have Permanently Reduced The Debt Of Just One Tenth Of 1 Percent Of Underwater Borrowers.” “But in reality, the programs were off-balance. Although advisers intended to address the debt problem, they set up programs in ways that were likely to limit their success — for example, asking banks to reduce debts without offering much taxpayer money to help cover the cost. To date, administration programs have permanently reduced the debt of just one tenth of 1 percent of underwater borrowers.” (Zachary A. Goldfarb, “Obama’s Efforts To Aid Homeowners, Boost Housing Market Fall Far Short Of Goals,” The Washington Post, 10/23/11)
  • In The End, The Obama Administration Is Only Expected To Spend $13 Billion On Its Housing Programs Yet “At Least 5 Million More Foreclosures Are Estimated In Coming Years.”  “All told, estimates indicate that when all current programs have run their course, the administration will have spent a total of about $13 billion on housing programs. Still, at least 5 million more foreclosures are estimated in coming years — and perhaps many more. This summer at the White House, Obama offered a rare acknowledgment that his response to the housing crisis had fallen short.” (Zachary A. Goldfarb, “Obama’s Efforts To Aid Homeowners, Boost Housing Market Fall Far Short Of Goals,” The Washington Post, 10/23/11)

Since President Obama Took Office, Over 7.5 Million Properties Have Received Foreclosure Filings. (RealtyTrac, Accessed 10/24/11)

  • In 2010, One In Every 45 Housing Units Received A Foreclosure Filing. (Press Release, “Record 2.9 Million U.S. Properties Receive Foreclosure Filings In 2010 Despite 30-Month Low In December,” RealtyTrac, 1/12/11)

“Housing Remains The U.S. Economy’s Albatross.” (Justin Lahart, “Number Of The Week: The Economy’s Housing Albatross,” The Wall Street Journal’s “Real Time Economics,” 10/1/11)

  • Residential Investment Was Only 2.2 Percent Of GDP In Second Quarter. “In the second quarter, residential investment — money spent on building, adding to and maintaining homes — accounted for just 2.2% of GDP, according to the Commerce Department.” (Justin Lahart, “Number Of The Week: The Economy’s Housing Albatross,” The Wall Street Journal’s “Real Time Economics,” 10/1/11)
  • “That Was The Lowest Level Since 1945, When America Was On A War Footing.” (Justin Lahart, “Number Of The Week: The Economy’s Housing Albatross,” The Wall Street Journal’s “Real Time Economics,” 10/1/11)

In August, 31 Percent Of All Existing Home Sales Were For Distressed Properties Either In Foreclosure Or Sold In A Short Sale. “The national median existing-home price3 for all housing types was $168,300 in August, which is 5.1 percent below August 2010. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 31 percent of sales in August, compared with 29 percent in July and 34 percent in August 2010.” (Press Release, “August Existing-Home Sales Rise Despite Headwinds, Up Strongly From A Year Ago,” National Association Of Realtors, 9/21/11)

23 Percent Of Home Loans Are Underwater, “A Leading Indicator Of A Borrower’s Propensity To Default.” “However, of the nearly 46 million loans that were current as of the end of August, 23 percent were still at risk as a result of negative equity – a leading indicator of a borrower’s propensity to default.” (Press Release, “LPS August Mortgage Monitor Report,” Lender Processing Services, 10/3/11)

  • 4 Million Home Loans Are Currently In Foreclosure Or More Than 90 Days Delinquent. (Press Release, “LPS August Mortgage Monitor Report,” Lender Processing Services, 10/3/11)

“The Alphabet Soup Of Housing Assistance Programs To Date -- HAMP, HARP, EHLP, 2MP -- Have Been Too Poorly Administered And Too Limited In Scope And Eligibility To Slow Or Halt The Slide In The U.S. Housing Market.” “Only 2 percent of President Obama's speech to Congress on Sept. 8 dealt with the plight of underwater homeowners, but those 72 words could do as much or more for the flagging U.S. economy as the entire $447 billion jobs bill. Especially if the White House is willing to think big. That's a big if, given that the alphabet soup of housing assistance programs to date -- HAMP, HARP, EHLP, 2MP -- have been too poorly administered and too limited in scope and eligibility to slow or halt the slide in the U.S. housing market.” (Eric Wieffering, “Fixing Economy Requires More Work On Housing,” Star Tribune, 9/17/11)

President Obama Promised That His Housing Program Would Prevent 7 To 9 Million Families From Foreclosure. “And we will pursue the housing plan I'm outlining today. And through this plan, we will help between 7 and 9 million families restructure or refinance their mortgages so they can afford—avoid foreclosure.” (President Barack Obama, Remarks On The Home Mortgage Industry In Mesa, Arizona, 2/18/09)

  • But As Of August, Only 690,969 Homeowners Had Received Permanent Modification Through The Home Affordable Modification Program (HAMP). “The number of borrowers who received permanent aid through the Obama administration's signature foreclosure relief program ticked up slightly in August. A total of 690,969 borrowers had received active permanent modifications through the Home Affordable Modification Program by the end of August, up 2.3% from July, the Treasury Department said Wednesday.” (Alejandro Lazo, “More Borrowers Gain Permanent Mortgage Relief In August,” Los Angeles Times’ “Money & Company,”10/5/11)
  • The Treasury Department Has Only Spent $1.85 Billion Of The $46 Billion It Was Given To Prevent Foreclosures. “As part of the bank bailout, the Treasury Department was given $46 billion to spend on keeping homeowners in their houses; to date, the agency has spent about $1.85 billion.” (Andrew Martin, “For Jobless, Little U.S. Help On Foreclosure,” The New York Times, 6/4/11)

Treasury Secretary Geithner Admitted That The Administration’s Housing Programs Have Not Lived Up To Expectations. “Mr. Geithner said that he agreed that the administration’s efforts had not met expectations, and he pointed to efforts by the Federal Housing Finance Agency to reduce barriers to refinancing, which he said could be introduced next week. ‘We are doing as much as we can with the authority we have to help people caught up in this crisis,’ Mr. Geithner said.” (Binyamin Appelbaum, “Treasury Secretary Urges Quick Action On Jobs Plan,” The New York Times, 10/6/11)

  • Geithner: “But Our Programs Have Dramatically Underperformed What We Thought. … We Are Very Disappointed And Frustrated By It And We Have A Lot Of Challenges Ahead.” (Treasury Secretary Timothy Geithner, Testimony Before The House Financial Services Committee, Washington, D.C., 10/6/11)

The Emergency Homeowners' Loan Program (EHLP) Is “The Most Recent Example Of Such An Effort Falling Short Of Goals.” “A federal initiative that gives bridge loans to homeowners struggling to make mortgage payments will likely pay out less than half the $1 billion that Congress allotted for the program, the most recent example of such an effort falling short of goals.” (Joseph De Avila, “Mortgage Aid Falls Short Of Its Goal,” The Wall Street Journal, 9/29/11)

  • Only 10,000 To 15,000 Homeowners Will Qualify For Aid Through EHLP. “Even after a Tuesday deadline for applicants to submit documentation was extended by two days, officials at the Department of Housing and Urban Development estimated that only about 10,000 to 15,000 homeowners will ultimately qualify. That would mean between $500 million and $670 million of the program's funds will be returned to the U.S. Treasury.” (Joseph De Avila, “Mortgage Aid Falls Short Of Its Goal,” The Wall Street Journal, 9/29/11)

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