Federal Mortgage Program a bust?
August 26, 2013
by Brian Wolf

Remember back in 2008, when things got a little tough and the economy was in a tailspin? As a result, home prices went down, a pretty big percentage of homeowners found themselves upside down (their mortgage was larger than their home value), and we were swamped by a default tsunami.

Then, the Obama Administration came to the rescue with a program called HAMP, which was part of TARP (the Troubled Asset Relief Program). They set aside $38 billion to help a projected 4 million struggling homeowners get relief on their mortgage payments so as to avoid default and maintain the loans in good standing. Basically, if you were about to default, this program helped you avoid that and keep your home.

Well, let’s see how that governmental program has worked out.

Taken from CNBC (http://www.cnbc.com/id/100909783)

“Mass Defaults Bring Obama Housing Rescue under Scrutiny,” the following is the first and second paragraphs of the article.

“Nearly half of the mortgages modified in 2009 under the Obama administrations signature homeowner rescue effort are in default again, according to a report on Wednesday that raised concerns about the programs effectiveness.

“The report from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the watchdog for the aid effort, said 46 percent of the struggling homeowners who received loan modifications in 2009 under the Home Affordable Modification Program had re-defaulted.”

To summarize:

Instead of helping 4 million households, they’ve helped about 865,000 families avoid foreclosure.

Of the 865,000 helped, however, 306,000 of them are going through foreclosure again anyway. Oops.

It turns out that if someone defaulted on a loan previously (or about to default in this case); they are a very likely candidate to default again. Surprise! Of course, any bank could have told them that, and let’s face it, you or I could have given the government the same information.

Now don’t get me wrong, I think it is great that this program gave some people a second chance to stay in their homes. I’m just saying that, once again, we get big promises from our government and end up receiving small, if any, results. And when all is said and done, a large amount of money ends up getting wasted. In other words, good intentions resulted in poor results.

All of this leads to higher taxes on the people who didn’t buy houses that they couldn’t afford. I don’t know about you, but I’m not impressed by a government program that has a success rate of only about 50 percent or just a fraction of the people that it was intended to help.

That’s why I feel it’s more important than ever to make sure your tax planning is up to date. Let’s not give the government one more penny than we legally have to, because they have proven time and time again that it will just get wasted! It doesn’t matter what you earn in your investments if it ends up going to the IRS anyway.

Your investment plan should work hand-in-hand with your tax plan. Does it?

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