How HAMP Alone Makes Elizabeth Warren The Only Choice For Consumer Protection

There’s a debate going on about who should be nominated to run the Consumer Financial Protection Bureau at the Federal Reserve. One side says Elizabeth Warren, while another says someone from Treasury, likely Michael Barr.

At a quick glance you might not see a big difference. As Felix notes, Michael Barr is very strong on consumer finance.

But I think Warren would be a far superior choice. There are many reasons why, but I want to discuss a very specific one here that distinguishes her from anyone in Treasury. The biggest: she is a strong critic of HAMP, Treasury’s largest intervention into the massive foreclosure crisis hitting millions of regular Americans, and she demands accountability on behalf of the people.

HAMP As Failure

The Home Affordability Modification Program is widely considered to be a failure. Here is Shahien Nasiripour reporting on the latest numbers rom June. They haven’t remotely hit their numbers that they were projecting, homeowners continue to suffer through a lack of modifications due to servicer problems and the overvaluation of their books. I wrote here about how in 2007 the creator of the mortgage bond instrument in the early 1980s said there was going to be a major market failure coming. There was a need for a government action.

HAMP is so failed that it is a bit of a game among the financial bloggers as to who has the best write-up of how bad it is each month and what are the killer statistics proving it. I’m calling Stacy-Marie Ishmael over at FT Alphaville this month’s winner with BarCap vs HUD on HAMP.

Evidence shows that there are principal increases for 80% of the people who go through HAMP. That is the exact opposite of what you’d like to see! It lowers interest rates, but it also increases the length of the loan. And for those who don’t have principal reduction, there is a massively high redefault rate. People lose their homes anyway even after jumping through cumbersome hoops.

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