Is Mortgage Aid Helping Those Who Need It?

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Love it or leave it, but we’ve seen extraordinary actions in the past couple months in terms of efforts, both on the side of lenders and government, to help those who are struggling with their mortgages. Uncle Sam has gone out of his way to drive interest rates down to historic lows, and consumers are scrambling to take advantage. Some banks, most notably Wells Fargo, are even starting to turn a profit from the increased activity. Here’s what Wells Fargo CFO Howard Atkins had to say about the recent quarter:

““Business momentum in the quarter reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results — $100 billion in mortgage originations, with a 41 percent increase in the unclosed application pipeline to $100 billion at quarter end, an indication of strong second quarter mortgage originations.”

Roll out the victory celebration, right? Strong mortgages? No way! But let’s look at this flurry of activity and see who’s really benefiting from it. Certainly we all stand to benefit from confidence in the U.S. Financial system, which has plummeted for well over a year now, but who’s getting the mortgage aid? So far, it looks like refinancing efforts have primarily affected those that weren’t in trouble in the first place (not that there’s anything wrong with that). The vast majority of consumers refinancing are homeowners with conventional mortgages who aren’t in serious trouble of losing their homes anyway.

That’s all well and good, since we’re all shouldering the tax consequences of these efforts, so why not benefit, but if those who aren’t in trouble are gaining the most help, it misses the mark of the program’s intention. The other goal of these efforts to lower rates was also to spur additional mortgage applications, bring those would-be buyers out of the wood work finally and get them to pull the trigger. We haven’t seen that yet either, as mortgage applications still remain depressed. Using actual lending standards will do that, I suppose, especially in comparison to application levels over the past few years, but the government may want to take a closer look and make modifications as needed to ensure their efforts are hitting the intended targets.