Refinancing mortgages, buying votes

President Obama's latest housing intervention will not prevent foreclosures, lift the housing market or boost the economic recovery, even though he promised as much Monday in Las Vegas.

Not even he believes a single, small executive decision can work such miracles.

No, his administration's expansion of the Home Affordable Refinance Program is about one thing, and one thing only: beating likely Republican nominee Mitt Romney in Nevada and other states with depressed real estate markets one year from now.

It's not a coincidence that both Obama and Romney made defining remarks on housing policy in Las Vegas this month. Southern Nevada is ground zero in the country's housing collapse, with roughly three-quarters of its homeowners anchored by negative equity.

Nevada is also one of the most important battleground states in the 2012 presidential election. Because of voter-registration margins, historic voting trends and current political realities, the outcome of next year's presidential vote is already all but locked up in more than 40 states, according to Larry Sabato, director of the University of Virginia Center for Politics. Writing in The Wall Street Journal last month, Sabato predicted Obama's re-election will come down to just seven "super-swing" states with 85 total Electoral College votes: Colorado (9), Florida (29), Iowa (6), Nevada (6), New Hampshire (4), Ohio (18) and Virginia (13).

The stakes here are as big as our housing troubles.

In a meeting with the Review-Journal's editorial board Oct. 17, Romney called for an end to the interventions and misguided rescue plans that have distorted the housing market and delayed its recovery.

The collapse in home values has been driven by the glut of foreclosure resales. Foreclosures are driven by job losses.

Romney said job growth is the only way to boost demand for housing, lift values and halt the tide of foreclosures. And to create private-sector jobs, Romney said, the country needs to adopt a favorable, certain tax structure; end federal deficit spending; and encourage investment by ceasing government hostility toward businesses.

Modifying or writing down mortgages -- as various Obama initiatives did without reversing the housing slide -- doesn't help if the homeowner has no income. Most modified mortgages end up defaulting again anyway.

"Bailing out homeowners one by one simply hasn't worked. ... Don't try and stop the foreclosure process," Romney said. "Let it run its course and hit the bottom."

Romney's comments went viral, and Democrats pounced. Senate Majority Leader Harry Reid of Nevada went so far as to demand that Romney apologize to "the thousands of Nevada families struggling to keep a roof over their heads." The Democratic National Committee began running advertisements ripping Romney for having the audacity to suggest that people who aren't paying their mortgages can't stay in their houses forever.

One problem: Obama can't claim that any of his economic policies have helped Nevada, considering its nation-leading unemployment and foreclosure rates and its bleak prospects for short-term growth. And most voters here won't soon forget Obama's two separate admonitions to Americans to not waste their money in Las Vegas.

So on Monday, Obama did the only thing he could do: He promised to deliver more taxpayer-backed swag.

HARP, as originally structured, was intended to refinance 5 million underwater mortgages, but fewer than 1 million homeowners have been able to take advantage. Only homeowners with mortgages held by federally backed Fannie Mae and Freddie Mac were eligible, and loans had to be worth 125 percent of a home's value or less. Lenders wouldn't give favorable refinancing terms to underwater homeowners, anyway. It was worthless to Nevada, where large numbers of homes are worth half what's owed on them.

All this fueled resentment among a growing, diverse class of voters: the suckers who have stayed current on their mortgages, are well over 25 percent underwater and can never escape advertisements touting record-low interest rates. These old-school citizens know people who've lived in their houses for more than a year without making a mortgage payment.

Obama's latest plan is aimed squarely at this bloc -- and it's a huge one in Clark County, comprising Democrats and Republicans, tea partiers and nonpartisans. Now people holding federally backed mortgages will be able to refinance through HARP no matter how far underwater they are -- as long as they're current on payments -- and a lot of homeowners will qualify to have fees and appraisals waived. The banks are playing ball because Fannie and Freddie (meaning taxpayers) will take the loss if a mortgage refinanced through HARP defaults.

Bank own your mortgage? Behind in your payments? Then tough luck.

Those who qualify for a HARP refinance will have to make a choice. They can reduce their monthly mortgage payment, perhaps by hundreds of dollars, but reset the amortization table on a 30-year term, putting them on an even slower path to getting above water unless they apply their savings to principal. Or they can refinance to a 15-year term to more quickly pay their way back into equity.

This doesn't "stop the foreclosure process," as Democrats have suggested they favor by attacking Romney. Homes in the foreclosure pipeline will stay there. Those who do refinance through HARP get no immunity from foreclosure if they lose their job and can't pay the mortgage. If a few million people are able to refinance and pour their monthly mortgage payment savings into the economy, the impact would be just a few billion dollars -- far less than the losses investors, including pension funds, would sustain from having so many performing mortgages paid off early.

No net benefit to the economy. No jobs to boost demand for housing. More liability for Fannie and Freddie.

Romney is right. The meddling has to stop. But for Obama, the opportunity to buy a few more votes at your expense, the chance to say he did something no matter how futile, is too tempting to pass up.

In a battleground state like Nevada, that just might be enough.

Glenn Cook (gcook@reviewjournal.com) is a Review-Journal editorial writer.