And so I assume they will now move to shut down off-site plastic surgery clinics, where women die every year?
Come to think of it, people die in hospitals, too. Shut ’em down!
In other words, Geithner did not have the remotest intention of avoiding foreclosures; quite the contrary. Because foreclosures—and delinquencies, and modifications, and just about any kind of mortgage that isn’t getting paid on time as usual—are such massive profit center for banks due to the gargantuan fees servicers reap off them, he fully intended to do whatever it took to keep the foreclosure boom booming!
All of a sudden, bits and pieces of conversations that I had had began to fall into place. Allison had used the phrase “helping them earn their way out of this” during part of a more extended conversation that summer about his worry that the banks could still collapse. HAMP was not separate from the bank bailouts; it was an essential part of them. From that perspective, it didn’t matter if the modifications failed after a year or so of trial payments or if struggling borrowers placed into doomed trial modifications ended up far worse off, as long as the banks were able to stretch out their plan until the profits returned.
Geithner’s revelation (he apparently similarly told bloggers in 2010 during an off-the-record conversation that HAMP had succeeded in extending out the foreclosure crisis) also helped explain one of the odder aspects of HAMP. For many borrowers, the modifications weren’t really all that “permanent.” Instead, after five years, the interest rate would be permitted to rise, much like the resetting adjustable rate mortgages of the financial crisis. This meant that within a handful of years after the “permanent” period of HAMP expired, the average borrower whose interest rate had been reduced to the minimum rate during his modification would eventually see his monthly payments rise by 23 percent,possibly putting him once again at risk for a default. Though that policy might undermine the long-term success of the program from the borrowers’ perspective, it made perfect sense if an immediate “foaming of the runway” for the banks was Treasury’s primary goal. For the banks, five years was an eternity.