A new report by Cora Currier over at ProPublica chronicles the massive practical shortcomings of the Democratic administration’s Home Affordable Refinance Program, or HARP, and why it continues to fail to offer underwater homeowners  any real relief. The program has also fizzled in offering meaningful rate reductions to those stuck with high percentage rates or adjustable ARM mortgages.

Large banks, although permitted to do so, are not offering those holding loans with competing banks refinancing under HARP because the banks view these outside loans as carrying more risk, which of course is only marginally accurate. This leaves the homeowner in the precarious position of being captive to whatever rate the bank currently servicing the mortgage offers. However, even with this fractional increase in risk, the administration is doing nothing to cajole the banks into offering customers more competitive rates and accepting outside business in return for saving them from the brink of disaster in 2009-2012.  Because the banks are refusing to compete with one another, customers are often left with higher long term mortgage rates than they would have otherwise qualified for under HARP or in the marketplace.

The reason for all of this, as it has always been, is that these programs fail to address the basic problems in the housing market. Unfortunately, the profound apprehension and outright fear on the part of the administration to forcefully attack the large banks continues to result in these half-assed band-aids and workarounds to address the housing market dilemma. The proof is in the pudding. The administration can not on its best day ever administer a program under which homeowners are stuck refinancing more than the home is worth. Leaving aside how awful the notion is of forcing homeowners to ultimately pay an inflated amount based squarely on the fraud of the banks and mortgage originators for a moment, the banks will not even cooperate in this scheme of forcing homeowners to lock in lower rates to pay them back money that they would not otherwise owe.

The bottom line is that this problem will persist for much longer and continue to create a drag on the overall economy until either the Republican or Democratic party, or both, stand up and force the banks to write-down millions of fraudulently inflated mortgages to fair value. To this point neither party seems willing to offer even an iota of evidence that Wall Street and the banks have not simply been given a blank check with nothing significant expected in return for their very lives.

I should also mention that I do in fact believe that President Obama understands this problem, and is well aware of the shortcomings of each of the programs offered as a remedy. I would even confess that it is extraordinarily likely that he honestly would love to force the banking sector to refinance and write-down the mortgage mess that it created. However, while the United Auto Workers and General Motors and Chrysler have had to accept onerous loan terms and drastic reductions in wages and benefits in return for the government’s assistance, the banks have suffered no similar consequences notwithstanding their far greater responsibility in the overall disaster. Why this has been the case has been fodder for much speculation. I sincerely hope that the American people do not have to wait for President’s Obama’s inevitable memoirs for an answer.