Updated: HARP1.0 versus HARP 2.0 or is it HARP 3.0?. Few can see any difference.

During a televised address to the nation,  this past week,  Obama revealed his new mortgage rescue plan.  In this article,  we put Harp 3.0 in context (this is Obama's third effort.  Read "update" at bottom of article).  

"I’m sending Congress a plan that will give every responsible homeowner the chance to save about $3,000 a year on their mortgages by refinancing at historically low rates. No more red tape. No more endless forms," Obama said in his weekly address. "And a small fee on the largest financial institutions will make sure it doesn't add a dime to the deficit."

Understand that this is very similar to Harp I and II,  Obama's mortgage rescue plans of 2009 and 2011.  These plans was originally designed to help 5 million.  The number was later increased to 9 million because it sounded better.  Less than 400,000 took advantage of the plan and more than a third of those applicants, wound up losing their homes,  anyway.   Harp I was a rather startling failure. Bush had a similar rescue,  with only 111 applications being written.   

Apparently,  in spite of all this failure,  Obama thinks it such a good idea,  that he wants to try it again.  You know  what they say about "crazy,"  that it is defined as trying the same thing over and over again, but,  expecting a different outcome.  With that in mind,  we have Obama saying this,  "I’ll be the first to admit it didn't help as many folks as we’d hoped.  But,  that doesn't mean we shouldn’t keep trying."

Pros and Cons

Understand that,  first of all,   you have to be someone who has the demonstrable ability to make the mortgage payments for six months or more.   In other words,  this is not a rescue plan for those who are most in need of an immediate solution.  Secondly,  it reduces your payment based upon access to lower refinanced interest rates.  In other words,  if you are "upside down" on your mortgage-to-equity ratio,  you are still "upside down" and to the same degree as before your "rescue."  The principle is not effected at all,  just the loan payment.  Thirdly,  your loan has be a GSE backed loan (Fannie or Freddie) which effects a little less than half of all current mortgages.  In other words,  this program may help no more than 20% of 50% of all homeowner and does not forestall foreclosure !!!     

Finally,  and this is the proof that Obama is a child when it comes to the world of finance,  you should know that interest collected is the bank or lending institution's "working capital" and "profit margin."  Many of the loans needing help have been sold and resold to other lenders,  based upon contracted interest rates.  Those lenders may not have enough margin,  after the fact,  to merit carrying the loan,  but will not be given a choice as to whether to participate or not.  As if that was not bad enough,  according to Obama,  he is going to tax the lenders in addition to their  loss of income.  

And that's his plan,  boys and girls.  From top to bottom,  it is worthless,  except that it gives him another rhetorical tool with which to beat the opposition to death.  


Update: actually,  as it turns out,  the current mortgage relief is "HARP 3."  From Zillow (a mortgage info blog),  we have this addendum:  

What is the Home Affordable Refinance Program (HARP)?

Announced in March 2009, HARP is a federal government program designed to help 5 million underwater or near-underwater homeowners refinance into a fixed loan with a lower monthly payment. However, as of Aug. 31, only 894,000 borrowers have refinanced through HARP. On Oct. 24, 2011, President Obama announced an overhaul to the HARP program with the intent of reaching more underwater homeowners. The expanded HARP program - also referred to as HARP 2.0 - will take effect on December 1, 2011 for borrowers with a loan-to-value ratio of less than 125 percent and in the first quarter of 2012 for borrowers with a loan-to-value ratio of greater than 125 percent.