Cash for Clunkers looks like a Mercedes compared to the Edsel of Making Home Affordable

Here's the thing most people don't get about Libertarians: we don't argue that no government program will ever work. We argue the ethical issue of government by blackmail or coercion, and the general ineptitude of government as pretty much leaving the burden of proof to the State that it should be trusted.

Lots of Americans have lined up for Cash for Clunkers because its the next-best-thing to the tax rebates and tax cuts we'd all like to see.

But lots of Americans also expected to be able to line up for mortgage refinances under President Obama's Making Homes Affordable program (actual acronym: HARP). The program was announced in February, and in May here's what Treasury Secretary Geithner said in a self-serving government press release about the success of the program thus far:

With the Making Home Affordable (MHA) program delivering much-needed relief to homeowners and to our economy just over two months after the release of program guidelines, Treasury Secretary Tim Geithner and Housing and Urban Development (HUD) Secretary Shaun Donovan today provided an update on the program’s impact on stemming the housing crisis and keeping families in their homes and announced new options for homeowners facing foreclosure. The announcement and update came following a meeting with housing counselors from the National Community Reinvestment Coalition (NCRC) and with homeowners Nicholas Tekpertey of Reston, VA, and Warren Rohn of Lewiston, CA, who shared their success stories since participating in the Home Affordable Modification program.

“In just over two months, the Making Home Affordable program is up and running, helping our economy recover and making a difference in the lives and livelihoods of thousands of American homeowners. Historically low interest rates are allowing Americans to refinance and save money, and modifications are helping homeowners avoid foreclosure,” said Secretary Geithner.

Ironically, Geithner was technically being honest when he said that the program had been helping thousands of people, because--as AOL Real Estate reports:

Things haven't turned out as planned. The Obama administration had expected up to 2 million homeowners to take advantage of the refinancing program by its expiration date of June 10, 2010. But four months into the 16-month program, about 13,000 refinances had been completed, meaning that it was on track to help 52,000 homeowners, or about 1,950,000 homeowners shy of the administration's goal. That shortfall is equivalent to the number of houses and apartments in all of Kentucky.

Why? Just ask CNN, which has been collecting stories from people who actually tried to use the HARP program:

CNNMoney.com reported today that they’ve received an overwhelming number of negative reviews from nearly 500 people who wrote in about their experiences trying to obtain a loan modification through Obama’s Making Home Affordable program. Here are just a few of those complaints pulled from the CNNMoney.com list:

“Obama’s plan is a joke,” wrote Jean in Michigan. “The banks are a joke… fax, fax, fax, call, call, call and no response for months. Even Washington representatives can’t get an answer or help, what a sham!!!!”

“I have a Fannie Mae loan through Bank of America and have been fighting with Bank of America since May to work with me. They continue to indicate that I do not qualify during this phase, but yet Fannie Mae says I do. BofA has given me every possible roadblock and excuse. They are definitely doing this intentionally.”

“Litton Loan serving is the worst.
I did an informal email survey recevied responses from 123 people who applied for Load Modification…NOT ONE got the Modification. All were lied to and dragged along for weeks until finally they were told they did not qualify. Who can stop this madness?”

Wow, it sounds like someone needs to report Obama’s plan to the Better Business Bureau!

You see, the program's guidelines have been so poorly written that even the banks can't agree on what they mean--and the banks don't actually have to participate if they don't want to do so. Here's just one convoluted snippet from AOL Real Estate to give you the flavor:

Misconception: Under the Home Affordable Refinance program, lenders are refinancing loans with mortgage insurance.

The reality: If major lenders are doing refis of loans with mortgage insurance, they're being discreet about it. Bank of America, Chase and CitiMortgage did not respond to inquiries, but if e-mails from Bankrate readers are to be believed, none of those big lenders is refinancing loans with mortgage insurance.

A Wells Fargo spokesman replied: "We are not offering HARP refinances to borrowers who have mortgage insurance on their existing loans at this time. Unfortunately, I'm not able to provide any insight as to when we may be able to do so."

Bank of America has implied that it will refi insured loans "as systems become operational." Other lenders have been tight-lipped about whether they will refinance loans with mortgage insurance at all.

When the Obama administration promised to let people refinance their home loans but keep the same mortgage insurance policy, it was telling the insurance industry to do something that it's not set up to do. It's akin to selling your old car and buying a new one, and expecting the auto insurer to transfer the policy without changing one word of it.

The mortgage insurance companies say they have the procedures in place. The lenders are saying almost nothing. Neither side is pointing fingers at the other. Without a blamefest, it's hard to discern what's going on.

A spokeswoman for mortgage insurer MGIC says some lenders are refinancing loans with mortgage insurance under HARP, but she couldn't say which ones.

So, yes, I guess the Cash for Clunkers program looks like a real winner compared to other recent government efforts.