Obama Plan Has Worsened the Foreclosure Disaster
April 29, 2009 • 6:05PM

Sources say that Administration or Federal Reserve talk on Capitol Hill about "a coming economic recovery," raise just as many Congressional hackles as proposals for voting any more bank bailout money. The reason, they say, is that the heat of constituent rage is blowing on all Members of Congress, and in particular, over the continuing disaster of home foreclosures. Despite all the "mortgage modification plans" of the past two years, the foreclosure tsunami keeps rising, wrecking lives, households, and neighborhoods; and for two years, no one in Congress has had the courage to introduce the only action that would stop them—Lyndon LaRouche's Homeowners and Bank Protection Act of 2007.

In the latest foreclosure figures reported by the tracking firm RealtyTrac, it becomes clear that President Obama's mortgage rescue plan, announced on Feb. 17, has actually made the foreclosure wave worse since then. RealtyTrac says foreclosures further spiked after February, with 320,000 filings and 86,000 home seizures in March. There were 802,000 foreclosure filings in the first quarter—the highest of any quarter so far—and 40% of those were in March. This showed the latest spike occurred after the brief foreclosure moratoria by Fannie Mae, Freddie Mac, Wells Fargo, and two other lenders were ended as a result of Obama's announcement of his "plan". Those moratoria had, for a while, capped the foreclosure tidal wave at a disastrous rate of 3 million a year; now, the rate is closer to 4 million.

Yesterday this unsuccessful plan—which involves paying monetary "incentives" or behaviorist "nudges" to lenders, before and after each time they refinance a mortgage, and each time the refinancing lasts six months without default—was extended to second mortgages, further expanding the lender bailout.

As for one of the primary driver of foreclosures—the home price collapse—newly released Case-Shiller Index figures for February showed the national average home-price drop since the peak of the bubble in September 2006, had reached 28% and was still falling at over 2% monthly (the January-to-February drop was 2.2%). The drop from February 2008 was 18.6%. Prices continued falling in all 20 major metropolitan areas.