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House of cards; Call it HAMP, call it HARP, it's little help.

COLUMN: In our opinion

More than 10 million Americans owe more on their mortgages than their homes are worth, including many in the Worcester area, but don't expect the government's latest assistance program to save the day for many of them.

More than 3 million homes have been foreclosed upon across the nation since the housing bubble popped in 2006 and 2007. It's one thing to be underwater on your mortgage, but the more painful situation is that faced by those drowning in their debts. First goes the job, and the house soon follows.

It was to help such homeowners that the Obama administration rolled out the Home Affordable Modification Program (HAMP) in 2009. But that program resulted in far fewer permanent mortgage loan modifications than the 3 million to 4 million it was supposed to help. And many who did find relief soon defaulted on their new mortgages. According to the National Taxpayers Union, other homeowners who entered the HAMP program and later dropped out, were left with larger debts and worse credit scores than before.

Undeterred by the dismal performance of HAMP, the administration is now pushing ahead with HARP, the Home Affordable Refinance Program, which targets those whose mortgages are underwater, but not in immediate danger of foreclosure. The idea is to ease the rules so as to help those homeowners refinance to a lower rate. In theory, the money they save will help stimulate the economy.

But relatively few homeowners will qualify and benefit from the program, and it is American taxpayers who will be floating them the money, through those infamous government-sponsored enterprises, Fannie Mae and Freddie Mac.

To be eligible for relief, a homeowner must hold a mortgage that was purchased by Fannie or Freddie before June 2009; must have less than 20 percent equity in the home; cannot have refinanced in the previous 30 months; must not have had a late payment in the last six months; and cannot have had more than one late payment in the last year.

In short, these are homeowners whose can still make their mortgage payments, but may not enjoy the lowest available rates. Using Fannie and Freddie to help lower their payments will mean floating additional taxpayer dollars to those two government-sponsored enterprises, who have already received $169 billion in taxpayer bailout dollars.

Sure, Fannie and Freddie are supposed to pay all that money back beginning in 2014. We're not overly optimistic that taxpayers' investment will be returned in full.

Years of rampant speculation in housing have now given way to the heartbreak of lost property values, lost investments, and foreclosed homes. The housing market would not have soared as high - and its subsequent fall would have been less painful - had the Bush and Obama administrations applied the brakes to Fannie and Freddie far sooner, and had politicians, banks and the housing industry not worked feverishly to encourage home ownership among millions of Americans who were in no position to afford homes.

Economic errors can be masked for a time, but ultimately there is little government can do to protect Americans from the consequences of years of bad policy. Some will experience economic ruin. Others will have to accept that their homes were never worth what they thought they were, but at least they have a roof over their heads. And still others, those who have saved and planned carefully, will enjoy a buyer's market and claim their dream home for far less than they had imagined.

Call it HAMP or HARP, Uncle Sam is ever eager to help. The only real solution, however, lies in letting the market take its natural course.
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Title Annotation:EDITORIAL
Publication:Telegram & Gazette (Worcester, MA)
Article Type:Editorial
Date:Oct 30, 2011
Words:607
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