The big plan to change mortgage terms so people can remain in their homes is not working.Anyone who has been out here in the jungle working with and against the big lenders could have seen that coming pretty easily. The news reports that 75 billion has been put into the program. That is a lot of money, at least where I shop anyway. It is also pretty easy to see why these modifications are ineffective. We need only to look to history. Some might suggest that the following is inaccurate or simplistic, and some might be correct, but mortgage modifications fail for reasons which are pretty well engrained in our society.Housing is the foundation of all community. Somewhere, a couple thousand years ago, people figured out it was better to sleep, eat, relax and watch TV in a nice dry warm place with a roof and walls. They called them “huts”. While caves had been popular up until that time, bears, snakes and mountain lions also liked to call them home. No home can be at peace if ferocious beasts are snacking on family members while you are trying to watch the playoffs.The discovery of the hut led not only to nicer and better huts, known as “houses”, and eventually to the idea that these houses belonged to whoever took the time and trouble to build them. This innovation leads to many more advances, including utility bills, real estate taxes (mailed by the “People in Charge of Things”) and the “mortgage”.It also lead to the notion that the hut owner, who paid all the bills, could kick out anybody he felt like, including his brother in law freeloading on his couch.This was not a problem, really, as some industrious tribe members saw the chance to make a few extra bucks by building extra huts, leading to the invention of renters.Now, there is nothing wrong with renting, in and of itself. Remember, the whole idea was to have your own hut. It did not always have to be a palace. In some places, renting came to be the normal way of obtaining a hut.So they coexisted, relatively happily, for several millennia, these renters and owners until, about 35 years ago, when the People in Charge of Things decided that home ownership was too valuable to be limited to only those who had the initiative, money or simple good fortune to go get their own hut. All those renters needed to be homeowners too, the People in Charge reasoned, but the renters did not have the money to buy them.So instead of working to create a better economy so that the renters could get better jobs, make more money, and buy their own hut, the People in Charge told the banks simply to give the renters mortgages so they could buy houses. It did not matter if they could afford them. It did not matter if they even knew what a mortgage was. The mortgage terms could be tweaked so that the loan could be paid for at least the first few years. The renters could refinance a few years down the road. Now everyone would have a chance to own a home and everyone was once again happy, but not for long.Well, renters are not used to shoveling snow or putting new roofs on houses or paying a mortgage and many did not have much money to begin with, so they naturally had a hard time keeping up with all this stuff. It was not their fault, really, it’s just that they might have been better off renting than owning, but the People in Charge thought otherwise.When the renters fell behind on their bills, the whole lending industry shut down the chance to refinance. The People in Charge told the Bankers to change the loan terms to help them, and paid them to do so.Now the Bankers, from far away tribes with a lot of money who went to Harvard and Yale, took the government’s money but faced a quandary. They were completely unfamiliar with both the average homeowner or the average renter. They did not know how they lived, where they worked, what kind of people they hung out with. Remember, housing is the foundation of community and if you don’t know the community, how can you make decisions affecting people’s housing?That did not bother them too much though. The Bankers lived in mansions (really, really big huts) and summered at the Cape or the Outer Banks (very often with the People in Charge) spending more on a round of golf that all the ordinary families spent on food in a week. They ran really big banks with thousands of underlings who did not make much money. The Bankers issued a proclamation to their underlings…”Since the government is giving us more free money to fix the bad loans we made, you underlings must pretend to set up a program to modify the loans. Don’t really do anything, just go through the motions and we’ll get some checks. Above all, do not go to where their huts are. The less we have to deal with those tribes the better. Send us a note to let us know how it’s going. We’ll be parasailing in Morocco.”That pretty much brings us up to the present point in history.If, instead of giving them money to go through the motions, the People in Charge made the Bankers come and spend some time in the communities which are being devastated by the fact that families are losing their homes, maybe things might improve a bit. Maybe they could discuss this over a round of golf. What would it hurt?Unfortunately, it is not happening. About 436,000 of the people enrolled in Mortgage Modification have dropped out of the Program, more than a third.”The foreclosure-prevention program has had minimal impact,” said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group. “It’s sad that they didn’t put the same amount of resources into helping families avoid foreclosure as they did helping banks.”Not surprisingly, in view of history, the Average Homeowner Tribe is on their own.
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