President Obama's failed foreclosure fund
By Angie Drobnic Holan
Published on Thursday, March 31st, 2011 at 11:34 a.m.
When it comes to President Barack Obama’s promise to create a foreclosure prevention fund, he’s kept to the letter of law, but his administration has completely failed to meet its spirit. For that, we’re moving this our rating to Promise Broken.
Let us explain.
Back during the campaign, Obama said he would create a $10 billion fund to help homeowners facing foreclosure. "Too many families are unable to refinance because no one will lend to them, and they are unable to sell their homes because the housing market has fallen," reads as statement of policy from Obama’s 2008 campaign. "As president, Obama will fight to ensure more Americans can achieve and protect the dream of home ownership." We named it one of our top promises, among the most significant campaign pledges Obama made.
And soon after his election, Obama outdid the promise of $10 billion, creating a foreclosure prevention fund that totaled $75 billion, paid for with funds from the Troubled Asset Relief Program (TARP) and the government sponsored mortgage giants Fannie Mae and Freddie Mac. Officials said the fund could help 9 million homeowners. We gave Obama a Promise Kept.
But as many months went by, the program never lived up to its promise. As of January 2011, the program had given permanent loan modifications to only about 500,000 homeowners.
The news website ProPublica has extensively investigated the program and reached a number of dismal conclusions.
"With millions of homeowners still struggling to stay in their homes, the Obama administration’s $75 billion foreclosure prevention program has been weakened, perhaps fatally, by lax oversight and a posture of cooperation—rather than enforcement—with the nation’s biggest banks," ProPublica reported. "Those banks, Bank of America, Wells Fargo, JPMorgan Chase, and Citibank, service the majority of mortgages."
As we were considering whether to change the rating on this promise, the special inspector general for the Troubled Asset Relief Program, Neil M. Barofsky, penned a damning op-ed in the New York Times, calling the housing program "a colossal failure," blaming a lack of enforcement on the part of the U.S. Treasury Department.
"Treasury Secretary Timothy Geithner has acknowledged that the program ‘won’t come close’ to fulfilling its original expectations, that its incentives are not ‘powerful enough’ and that the mortgage servicers are ‘still doing a terribly inadequate job,’" Barofsky wrote. "But Treasury officials refuse to address these shortfalls. Instead they continue to stubbornly maintain that the program is a success and needs no material change, effectively assuring that Treasury’s most specific Main Street promise will not be honored."
The evidence has been mounting for some time that the foreclosure prevention fund has fallen far short of its goals. If it ever rights itself, we’d certainly be willing to reconsider our rating. But today, it hasn’t helped many homeowners faced with losing their houses. We conclude it’s a Promise Broken.
ProPublica, Govt’s Loan Mod Program Crippled by Lax Oversight and Deference to Banks, Feb.17, 2011
ProPublica, Dems: Obama Broke Pledge to Force Banks to Help Homeowners, Feb. 4, 2011
ProPublica, Eye on Loan Modifications, various reports on various dates
The New York Times, Where the Bailout Went Wrong, by Neil M. Barofsky, March 30, 2011
Researchers: Angie Drobnic Holan
Names in this article: Barack Obama
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