It's 2012, and we're still waiting for the real estate market to show some consistent signs of recovery.
The stumbling block, is, of course, the millions of borrowers in one phase or another of financial distress.
The Obama administration's record bringing this situation under control is abysmal, a patchwork of initiatives wholly dependent on the goodwill of the lenders and servicers of mortgages. (You can go to the Department of Treasury's website to look at the numbers since 2009 for yourself: http://goo.gl/rpflw).
In his State of the Union address, the president proposed yet another effort to reduce the number of foreclosures by allowing mortgages not owned by Fannie Mae or Freddie Mac to be refinanced through the Federal Housing Administration. He announced the details Feb. 1
Many observers see this as election-year posturing since, as with most of Obama's foreclosure-fighting programs, this one needs cooperation from the big lenders.
The primary concern expressed after the announcement was the effect of dumping millions of mortgages on the stressed-out FHA.
Here's the problem, as Edward Pinto of the conservative American Enterprise Institute, among others, sees it:
The offer to refinance was extended to "responsible" homeowners, those current on their mortgages. CoreLogic, the research firm that tracks about 85 percent of all U.S. mortgages, says that might mean 28 million borrowers.
"Such a mass refinancing could once again roil the mortgage finance market, penalize savers, further delay the return of private capital, and create further uncertainty as to prepayment expectations," Pinto said. "This could lead to reduced demand resulting in higher housing finance costs in the future."
For 31/2 years, he said, "we have been using mortgage refinances as a 'cheap' stimulus, the results of which are highly questionable. The refinance process is largely a zero-sum game.
"Someone is currently receiving income on these mortgages or mortgage-backed securities, which income is lost upon refinance. This greatly reduces the stimulus value of the program. Instead, the focus must be on permanent private-sector jobs."
Pinto said using FHA as insurer for such a program will inundate the agency and detract from the real and pressing reform needed "to protect taxpayers, the families unknowingly getting risky loans, and the neighborhoods affected by its lending."
The eligibility pool for this program swamps the Obama administration's three-year-old Home Affordable Mortgage Program and the Home Affordable Refinancing Program initiatives, Pinto said.
"While billed as 'no more red tape,' none of the programs have met this test," he said. "This could bring the mortgage-finance industry to a standstill - including new home-purchase originations."
Pinto suggested finding more investors, especially those on the local level who have been buying up excess housing stock and renting it out, to buy mortgages.
Financing might be increased by raising the number of loans for a single owner Fannie Mae is willing to guarantee - one suggestion is to 25, from the current 10.
Another suggestion is to provide a modification to today's interest rate to nondelinquent homeowners with loans greater than or equal to a 120 percent loan-to-value ratio guaranteed by Fannie or Freddie before the two were placed in conservatorship - meaning that the borrowers will have been paying for five years, at least.
"This would accomplish the goal of rapid deleverage as the loan would pay off in 15 to 18 years," thus presenting "little or no moral hazard."
It "could be done rapidly on a mass basis with little or no borrower fees," Pinto said.
Contact Alan J. Heavens at 215-854-2472, firstname.lastname@example.org or @alheavens on Twitter.