Americans Need Debt Relief -- Is Obama Brave Enough to Make It Happen?

Stung by the election of Scott Brown in Massachusetts, the abandonment of his health care initiative by members of Congress and fearful of a political backlash, President Obama may have realized that he himself is not "too big to fail." He has now "pivoted," to use a favorite phrase from the pundits, and shifted his focus to trying to fix a still deteriorating economy.

He has gone from coddling the banks to turning on them with strong rhetoric that has financial stocks reeling, and progressives cheering. Analysts who have looked at the content of his new rules though, say they are vague enough to dive a supertanker through. Another reform in name and gesture but not in reality!

The administration is also floating new proposals to reenergize a foreclosure relief program that has brought little relief to beleaguered homeowners. More liberal terms for loan repayments are being introduced especially for those who have trouble paying their mortgages because they have lost jobs.

Today, default/delinquency/foreclosure rates continue to skyrocket and soon there will be more prime mortgages in arrears than subprime ones. More than 25% of all homes are now "under water." Millions more families are at risk. Foreclosures continue to rise. The housing crisis at the center of the financial crisis has not been "fixed."

What to do? Doing nothing is no longer an option.

This crisis will spill over into the political arena unless the Administration does a lot more than it is doing.

For nearly two years, I have been calling to modify loans, not foreclose on homes. The government said they would do it but their programs don’t appear to be working because banks and real estate companies make more money foreclosing than making deals that keep homeowners under their roofs.

The consequence: 14 million families—and we are talking millions of children too—forced into the streets or worse conditions.

The New York Times blamed the President's Making Home Affordable program for increasing the agony of homeowners:

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.

Wrote a critic on the Atlantic website:

Obama's Making Home Affordable program is actually increasing the agony of homeowners, who pour money down the rat hole of their mortgage rather than recognizing the loss and starting over. In the meantime, the modification programs disguise the true condition of bank balance sheets (because modified mortgages are not yet non-performing mortgages), and slow down the process of recovery.

The Washington Post found, "The government's foreclosure relief program is sputtering, according to government data showing that the pace of help being offered to struggling homeowners slowed last month and many borrowers are at risk of losing the aid they have already received."

The LA Times went further:

Only 31,382 of more than 700,000 mortgage modifications under the federal program had been made permanent by the end of November…The numbers reinforced the bleak picture that Treasury Department officials painted last week when they said the number of permanent reductions was low. They unveiled new measures, including the threat of fines, to push mortgage servicers to improve their performance.

When airport security doesn’t work, they junk it. It is time to do the same with programs that are not helping homeowners. These half-measures that are being so half-heartedly implemented are a cruel disgrace.