How Barack Obama Made People Stop Believing in Government

Do you remember the history HARP?

Barack Obama and Timothy Geithner, said that they had a program to help distressed homeowners, when it was actually a program that consistently screwed homeowners in order to "foam the runway" for the banksters by allowing them to puff up their balance sheets.

Well, people remember this, and now that Obama is (allegedly) trying to provide real aid to homeowners, they are finding that have no takers because the homeowners in question do not trust the government to help them any more:

We all remember the fable of The Boy Who Cried Wolf. The moral of the story: Lie one too many times and nobody will believe you, even when you’re telling the truth. Now we have a case of The Government Who Cried Wolf, showing how the failure of the Obama administration’s foreclosure mitigation programs haunt them to this day.

The Federal Housing Finance Agency (FHFA), which oversees mortgage giants Fannie Mae and Freddie Mac, wants to help around 676,000 homeowners it has identified as eligible for refinancing under the government’s Home Affordable Refinancing Program (HARP).

………

But these remaining homeowners appear to have no interest in the program, and Watt explained why in Chicago. “We have written to them. We have called them, and they're saying this is too good to be true,” he said.

Why would homeowners exhibit so much skepticism in a government program that they feel inclined to turn down thousands of dollars in free money? You can track it back to all the promises made over the past five years to help homeowners, and the unfortunately sorry results.

In 2009, when the foreclosure crisis was most acute, President Obama promised to save 4 million homes through the Home Affordable Modification Program (HAMP). Today, only around 900,000 hold active permanent HAMP modifications, while millions of others either re-defaulted or were rejected by the program. Mortgage servicing companies, which had a greater financial incentive to foreclose over modifying home loans, quickly figured out how to game the system, using it to pile more bad debt on borrowers for their own reward.

The process devolved into a horror show for homeowners. Servicers prolonged trial modifications well past the three-month period set out in HAMP guidelines so that they could rack up late fees. They deliberately lost borrower’s income documents to extend the default period, even shredding documents and purging records to do so. They pursued foreclosure while negotiating the modification, against HAMP rules. They granted modifications that folded servicer fees into the principal of the loan, increasing the unpaid principal balance — and thus their profit — while pushing the borrower further underwater. And they trapped borrowers after denying modifications, demanding back payments, missed interest and late fees, with the threat of foreclosure as a hammer.

This sometimes forced borrowers into “private” modifications with the servicer, usually on worse terms than the status quo. Or it led to many of the 5.6 million foreclosures we’ve seen since the collapse of the housing bubble. One set of employees at Bank of America testified that they were given bonuses like Target gift cards for pushing homeowners into foreclosure.

Subsequent government programs, like the “Hardest Hit Fund” directed at states with the most nagging foreclosure crises, similarly failed to deliver. The failure to restructure mortgages and avert foreclosures is seen as the biggest policy mistake of the Great Recession.

It's easy to prove to people that government cannot work, you just have to do things like HAMP, and lie to people and design programs to fail when view through the lens of their professed goals.

On the far side, however, when you actually want to help people, they no longer trust you, forever and ever.

Note that Obama and His Evil Minions^™ had a completely free hand in designing these programs, so they own the fallou, or as Atrios notes:

Plenty of things are genuinely beyond Obama's control, but we have an example of something which was 100% in his control. And it was horrible.