The 5 Dumbest Things on Wall Street: Aug. 20

5. The Federal Mortgage Program -- Almost as Successful as the Titanic!

Homeowners drowning under the weight of high mortgage rates and a plunging economy are finding that their rescuer has arrived in a leaky boat without a life ring -- or even a pair of arm floaties. And the lifeline the government did manage to throw out was, apparently, too knotted and twisted for homeowners to untangle.

Indeed, the Obama administration's $275 billion "Making Home Affordable" program was billed as having the potential to reach up to 9 million troubled homeowners, according to initial estimates. Instead -- according to a weeklong series in The Street this week -- paperwork delays, confusion over eligibility requirements and the hesitance of banks to participate has left millions out in the cold.

President Obama unveiled the "Making Home Affordable" program in February 2009 as a solution to a mortgage crisis that had clearly spiraled out of control. The most recent report on the program, from June, found it to be falling far short of its stated goals.

According to the report, just 24% of borrowers eligible for a federal mortgage-modification program have received permanent mortgage modifications. And while 1.6 million homeowners were eligible as of the last report, more than half a million had abandoned the program, seeking other solutions or falling victim to the housing market's collapse. Others have been excluded because properties are vacant, or because owners earn too much money, don't owe enough money or haven't seen home values plunge far enough.

Adding injury to insult, since the program's inception, nearly 6 million homes have received foreclosure filings, according to RealtyTrac -- despite a foreclosure-moratorium that predated the program and lasted through March.

Fewer than 390,000 homeowners are now in permanent mortgage modifications through the Home Affordable Modification Program. Meanwhile, nearly 530,000 participants have canceled mortgage modifications.

Let's put it all another way: Roughly 24% of all borrowers eligible for the mortgage modification have received mortgage modification; by comparison, in 1912, almost 32% of the passengers aboard the Titanic when it struck an iceberg in were saved. There must be a metaphor in there somewhere -- something involving "underwater mortgages" and "sinking ships" and "perfect storms," perhaps?

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