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October 16, 2017

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The Policy Racket

Berkley among Democrats joining GOP in vote against mortgage assistance program

Shelley Berkley

Shelley Berkley

Joe Heck

Joe Heck

Usually, it’s the Republicans voting to strip out Obama’s recession-era initiatives, and the Democrats backing them for all they’re worth.

The Nevada delegation today however, turned that traditional calculus on its head.

The House voted Tuesday night on whether it should be tamping down the government’s key mortgage assistance program, HAMP, which has been shown to have only a 2.6 percent success rate in Nevada but which backers — including Nevada Republican Rep. Joe Heck — say is important to “help Nevadans stay in their homes.”

Those backers do not include Nevada Democratic Rep. Shelley Berkley anymore.

Berkley joined with a small group of Democrats who have been railing against the HAMP program.

The chief complaint these Democrats have with HAMP isn’t that it just hasn’t met its target of helping 3 million or 4 million Americans refinance their mortgages, as Obama promised it would back in 2009 when it was approved. It’s that these days, more than half of the people the program counts as having “helped” are getting kicked off the wagon for being too bad off — and that number includes many Nevadans.

Last year, the number of HAMP recipients being kicked out of the program actually outpaced the number being moved into the “permanent” category, receiving the full five years of assistance to which the program was billed as being eligible.

So what’s the alternative?

Well, if it’s to come from the House Democrats, it’ll likely be Berkley’s brainchild. She’s co-chairing the caucus’s Housing Stabilization Task Force, an informal body she created last year with California’s Dennis Cardoza that is focusing its efforts acutely on the residential housing crisis this Congress.

What’s seemed to work best in Nevada — and what Berkley already seems to have adopted as her model for at least one other program — is the Hardest Hit model, a program through which the government, in partnership with banks, aims to pay down the principal of an underwater loan a certain amount, such that the homeowner has a better ability to pay it off, and faster.

Berkley co-opted this basic structure earlier this month when she introduced the Community Recovery and Enhancement Act, a bill that would actually seek to cull private-sector investments (instead of straight-up investments from the government) through tax incentives.

Investors put up money — at least 80 percent of which is used to pay down the mortgage debt — and in return, the investor gets a one-time bonus depreciation deduction, the point of which is to create stakeholders with an organic motivation to put down hard dollars to bring about a quick turnaround.

Though we haven’t seen legislation to address the independent homeowner market yet, Berkley’s already called on the federal government to expand state-designed Hardest Hit fund programs.

But that sort of a deal would depend as much on the banks as the federal government. And while Nevada managed to strike a deal with Bank of America along with California and Arizona this year, that model won’t be the easiest thing to export nationwide — or even to other financial institutions close to home.

Foreclosure banks are on thin ice with the federal government these days. Bank of America is just one of a handful of institutions that have been censured over shady foreclosure tactics.

Bank of America, Ally Financial, Citibank, J.P. Morgan Chase and Wells Fargo are scheduled to meet with members of the Obama administration Wednesday to hash out what behavioral changes they plan to make going forward.

But their collective mea culpa hasn’t gone so far as to include a nod to what several states and federal agencies have also been clamoring for: engaging in principal reductions with borrowers, either under the Hardest Hit umbrella or of their own volition.

Of course, there’s a political undercurrent to all of this. While the House voted 252-170 to kill the HAMP program, with 18 Democrats joining the Republicans, it’s likely not going to get very far.

More temporary HAMP recipients may be getting kicked onto the street than permanently grandfathered into the program, but that doesn’t mean the program has failed everybody, and most Democrats in the Senate and the president still support it. So much so that the Obama administration issued a fairly bold veto threat against tearing down the program and starting afresh on Tuesday afternoon.

“As tens of thousands of responsible American homeowners struggling with their mortgages receive permanent assistance each month from HAMP,” the statement read, “the Administration believes that continuation of HAMP is important to the nation’s sustained economic recovery.”

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