The Pros and Cons of Harp 2.0.

During a televised address to the nation,  this past week,  Obama revealed his new mortgage rescue plan.  In this article,  we put Harp 2.0 in context.  

"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,  Obama's mortgage rescue plan of two years ago.  That plan 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.  

Apparently,  in spite of its failure,  Obama thinks it such a good idea,  that he wants to try it again.  You know  what they say about "idiocy,"  that it is trying the same thing over and over again,  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.