On MSNBC Live, Norah O'Donnell asked Dina ElBoghdady to "explain" why the "centerpiece of the federal program to help struggling homeowners has been a complete failure," but the two noted only HUD Secretary Steve Preston's assertion that, in O'Donnell's words, "it's Congress to blame." Neither O'Donnell nor ElBoghdady mentioned any Democratic criticism of the Bush administration's handling of the Housing and Economic Recovery Act.
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During the December 17 edition of MSNBC Live, anchor Norah O'Donnell asked Washington Post staff writer Dina ElBoghdady to "explain" why the "centerpiece of the federal program to help struggling homeowners has been a complete failure." But during the discussion, O'Donnell and ElBoghdady noted only one side of the debate -- Housing and Urban Development Secretary Steve Preston's assertion that, in O'Donnell's words, "it's Congress to blame." At no point did O'Donnell or ElBoghdady mention any Democratic criticism of the Bush administration's handling of the Housing and Economic Recovery Act, even though the Post published an article by ElBoghdady the same day she appeared on MSNBC in which she quoted House Financial Services Committee chairman Barney Frank (D-MA) saying, "The administration was critical of the program and kept putting pressure on us to make it cheaper and more restrictive. ... If it hadn't been for the Bush administration's opposition, we would have written it in a better way in the first place."
ElBoghdady also stated on MSNBC that Preston "says that FHA [the Federal Housing Administration] was not given enough latitude" and that "there are a lot of different features of this program ... that FHA said tied its hands." ElBoghdady cited in particular "a feature in there that says that [home buyers] have to sign all sorts of statements" about their prior loan applications, a requirement that she said "wipes out a lot of people who probably need the help and now can't get it." And in her December 17 Post article, ElBoghdady wrote that Preston said the bill "is too expensive and onerous for lenders and borrowers alike" and later quoted Preston criticizing the feasibility of the same provision ElBoghdady cited on MSNBC. However, in neither her Post article nor her MSNBC appearance did ElBoghdady point out that when the Bush administration initially objected to the housing retention bill, it said nothing about the burden on homeowners facing foreclosure, instead claiming that the bill "would force FHA and taxpayers to take on excessive risk."
From the Bush administration's May 6 statement of principles, in which it threatened to veto the bill establishing the homeownership retention loans:
Unlike the Administration's recent administrative efforts to broaden FHA eligibility, H.R. 3221 is overly burdensome and prescriptive. It would force FHA and taxpayers to take on excessive risk, and jeopardize FHA's financial solvency. The Congressional Budget Office estimates that the FHA loan guarantee program in this bill would produce claim rates of about 35 percent and, for the first time for this type of program, require credit subsidy appropriations to operate. The $1.7 billion price tag would be passed on to taxpayers who are not participating in this new FHA program. This attempt to shift costs to taxpayers constitutes a bailout.
During the MSNBC segment, ElBoghdady and O'Donnell also failed to mention that Frank encouraged the Bush administration in a November 20 letter to use money available in the Emergency Economic Stabilization Act to help homeowners apply for funds. Frank's letter to Treasury Secretary Henry Paulson requested that the Troubled Assets Relief Program (TARP) created by the act be used to help homeowners participate. In his letter -- which ElBoghdady noted in her Post article -- Frank wrote, "Treasury should augment these changes by using TARP funds (under the authority in Section 109) to reduce the high level of upfront and annual fees required under Hope for Homeowners loans. These high fees are depressing program use, and using TARP funds to pay them down could significantly increase the number of foreclosures averted." In her article, ElBoghdady reported of the letter, "Rep. Barney Frank (D-Mass.), who helped steer the HUD program through Congress, said some of the federal bailout money should be used to revamp it. ... Frank provided a letter he wrote to Treasury Secretary Henry M. Paulson Jr. in late November urging him to use the bailout money Congress approved for rescuing the financial markets to reduce the upfront and annual fees, because these are reducing use of the Hope for Homeowners program."
From the 3 p.m. ET hour of MSNBC Live on December 17:
O'DONNELL: Who's to blame for the foreclosures in this country and the fact that the government's not helping? Well, if you ask the secretary of Housing and Urban Development, he's saying it's Congress to blame. HUD Secretary Steve Preston says that the federal government's special three-year program for helping homeowners stay out of foreclosure is far too difficult and extensive and has only drawn -- get this -- a few hundred applications.
Joining me now is Dina ElBoghdady. She is the financial reporter for The Washington Post who's written about this in today's Washington Post, and it's on the front page. Dina thanks so much for joining us.
ElBOGHDADY: Thank you.
O'DONNELL: All right. This centerpiece of the federal program to help struggling homeowners has been a complete failure. A lot of people look at this story and say, "What the heck is going on in Washington?" Explain what's happening.
ElBOGHDADY: Well, what's happening right now is a lot of trial and error. The federal government, you know -- this was the first massive initiative the federal government out put out to help struggling homeowners. And the idea behind it was that FHA is an existing agency. It's got its people in place. It knows mortgages. And so rather than invent something from scratch, why not start with an agency that's already up and running and get them to launch this program? And the --
O'DONNELL: But Dina, there's -- as you point out, there's 400,000 -- this program was supposed to help out 400,000 borrowers avoid foreclosure, but it's attracted only 312 applications. What are people who are facing foreclosure supposed to do, and why is this program not helpful?
ElBOGHDADY: Well, if the way Steve Preston tells it, the HUD secretary, he says that FHA was not given enough latitude for -- to spell out how the program should be carried out. He said that Congress took care of every last detail of this program and that they are not the experts in the mortgage industry, that it's FHA that's the experts. So what they wanted, what FHA wanted, was more latitude to do what it needed to do.
And so there are a lot of different features of this program that they said basically -- that FHA said tied its hands. For instance, there's a feature in there that says that you have to sign all sorts of statements saying that you didn't previously commit fraud or lie when you took out your original loan.
Well, there's an understanding now that a lot of the loans that were taken out during the subprime crisis were loans that were stated income, meaning that the borrower did not have to verify their income. And so, already, that wipes out a lot of people who probably need the help and now can't get it.
O'DONNELL: I mean, as you know, and as the top government official said, at the root of what's going on in the economy is this mortgage crisis, and until they solve the housing crisis in this country, we can't move forward. And yet, the government doesn't seem to be able to get its handle around helping people who need help with foreclosures, right?
ElBOGHDADY: That's right. I mean, the forecast right now, at least from one expert, is that there could be 8 million to 9 million foreclosures coming over the next four years. And so the federal government really has to understand the population of borrowers, what their situations are, who can it help, who can it not help, because some people simply won't be able to afford a mortgage even if their loan is modified.
So the government has a big task ahead, and I think one of the problems is sort of defining the population of borrowers that can receive help, and then deciding how to help them.
O'DONNELL: Yeah. Dina ElBoghdady. I know this is the number one-viewed story on washingtonpost.com today, because people want to know where their taxpayer money is going. They want to know this government is doing something. And to read that this -- essentially this has been a complete failure in this regard, it's really eye-opening. Dina, great reporting. Thanks so much for joining us and sharing it with us.
ElBOGHDADY: Thank you. Thanks.