GOPideas... ideas done right

I noticed another story today concerning the Home Affordable Modification Plan (HAMP), which had the predictable effect of making my head explode because all it does is make banks eat huge losses on mortgages, thus handing thousands of dollars to homeowners who refuse to keep their end of a mortgage deal. It’s possible that my previous analysis was based on faulty assumptions, illogical reasoning or just plain stupid. If it is, please post a comment or email me because I want to be proven wrong --- my health depends on it.

If you search for HAMP or “Obama Housing Plan” the analysis done by the media outlets can be summed up as: a change here, a new mortgage there, a couple thousand bucks in incentives is a small price to pay for saving homes.

However, I have not seen any detailed analysis of how the plan actually works. I would like to do one, but cannot, as the Obama administration has specifically stated that the assumptions used will be provided to banks and not made public. However, the most important point is the NPV test that requires recipients of TARP funds to determine whether they would receive more money through foreclosing or writing down the mortgage.

The NPV test is a rigged game: by providing banks with specific assumptions, the Obama administration can force a bank to rewrite a mortgage. This is not an option under the plan: a bank is required to rewrite the mortgage if the calculated NPV is greater for a modification than a foreclosure.

Let’s say the administration wants to use private dollars to garner political support. (Like, say, prop up failing companies, give the people responsible for the failure money and stick citizens with the bill). Here’s how it would work:

• Require private companies dependent on government entities to participate. Like, say, those that work with Fannie and Freddie, who functionally own the mortgage market.
• Create an “objective” test and standard --- set by the administration
• Rig the data standard to ensure the test turns out the way you want.
• Force taxpayers (who no know better) or banks (who everyone despises) to eat the losses.
• Declare a victory for the poor, oppressed homeowners

This is what the Obama plan does --- if it doesn’t please correct me.