BLOG VIEW: In announcing the Feb. 9 shakedown – whoops, sorry, settlement – between the nation's five major banks and a coalition of federal and state government agencies, President Obama proclaimed the sighting of the light at the end of the proverbial tunnel.
‘We have reached a landmark settlement with the nation's largest banks that will speed relief to the hardest-hit homeowners, end some of the most abusive practices of the mortgage industry, and begin to turn the page on an era of recklessness that has left so much damage in its wake,’ Obama said.
On all three counts, the president is miles removed from the truth. First, the settlement will take at least a few years to complete, and it is safe to assume that too many homeowners waiting for relief will find their time wasted before any help arrives. Michael Calhoun, president of the Center for Responsible Lending, pointed out that the settlement is not enough to seriously address the major problems facing homeowners.
‘This action is crucial to contain the damage foreclosures have heaped on our economy, but it is only one response – and one that is necessarily limited by legal and practical restraints,’ he says. ‘Addressing the massive foreclosure crisis requires additional policy actions on multiple fronts.’
Second, the settlement does not ‘end some of the most abusive practices of the mortgage industry.’ The various rules and regulations that were put in place after the 2008 crash reconfigured how the industry operated. And while some of the changes were long overdue, others – especially the qualified residential mortgage proposals – created more harm than good.
Of course, there is also the controversy surrounding robo-signing. But the president conveniently forgot that the robo-signing practices (which were not industry-wide, but were limited to a relatively small number of companies) ended before the settlement talks began. The settlement itself ends nothing that is even vaguely ‘abusive.’
As for turning the page on ‘an era of recklessness that has left so much damage in its wake,’ Obama is probably not talking about years of stupid federal policies to artificially pump up homeownership or the recklessness of too many people who borrowed far beyond their means and wound up with loans they were incapable of repaying. This administration has yet to deviate from its propaganda that the private sector was solely responsible for the 2008 crash and that homeowners, government agencies and the government-sponsored enterprises played no role whatsoever in the catastrophe.
In his 2006 book ‘The Audacity of Hope,’ Obama warned of dire consequences that would result if the U.S. was not able to recognize the dangers in its immediate path. ‘If we don't change course soon, we may be the first generation in a very long time that leaves behind a weaker and more fractured America than the one we inherited,’ he wrote.
Elsewhere in the book, he noted, ‘What's troubling is the gap between the magnitude of our challenges and the smallness of our politics – the ease with which we are distracted by the petty and trivial, our chronic avoidance of tough decisions, our seeming inability to build a working consensus to tackle any big problem.’
Little did Obama realize that he was publishing his own presidential prophecies. In the past three years, the administration has found itself ‘distracted by the petty and trivial’ (the cynical in-fighting that kept White House from nominating a director for the Consumer Financial Protection Bureau for nearly a year), dragged down by a ‘chronic avoidance of tough decisions’ (the refusal to address reforming the government-sponsored enterprises) and stuck with a ‘seeming inability to build a working consensus to tackle any big problem’ (the administration's utter lack of leadership in the disastrous debt-ceiling talks).
And as for holding up the foreclosure settlement and insisting this rickety and ridiculous mess is a genuine victory for the American people, Obama has made the full transition from the audacity of hope to the mendacity of hopelessness. Yes, the president has seen the light at the end of the tunnel – but how long will it take before he realizes that it belongs to an oncoming train?
– Phil Hall, editor, MortgageOrb
(Please address all comments regarding this opinion column to hallp@mortgageorb.com.)
