It Depends On Your Definition Of Success

Steve Waldman at Interfluidity gives a pretty detailed and exhaustively long recounting of last week's Treasury Department meetings with econ bloggers (as econ bloggers are wont to do) but Atrios flags down this paragraph in Waldman's story that really does explain a lot.

The conversation next turned to housing and HAMP. On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.

To recap, the Home Affordable Modification Program was a success as far as Treasury was concerned because it helped the banks, despite the fact that by any measure it was a massive failure as far as actual homeowners were concerned.  It didn't keep people in their homes, it didn't make them more affordable, and it didn't modify mortgage terms.  Millions dropped out of the program and will most likely lose their homes now because now the banks can afford to repossess when they couldn't in 2009.

Great for banks.  Not so good for homeowners.  Terrible for taxpayers.  Obama and Timmy really, really botched this one from start to finish.

Marcy Wheeler and David Dayen have a pair of excellent pieces on HAMP as well.  As I said over a year ago, cramdown would have been an infinitely better solution to helping howeowners...but the HAMP program was never about helping homeowners, now was it?