I have been really hitting on the topic of mortgage reform for the last couple of weeks, hoping that my enthusiasm would be rewarded by the highest elected office in the U.S. At a press conference in Falls Church, VA on the topic, President Obama announced his latest and greatest plan to help underwater homeowners refinance and take advantage of probably what amounts to the lowest rates that any of us will see in our lifetime. As he went through his latest and greatest plan, all I could think was wow, that amounted to a whole lot of nothing.

You remember the movie National Lampoon’s Vacation? I felt like Clark Griswald when he drove up to Wallyworld and it was closed. I swear this program was hyped up beyond belief and it did little to live up to its potential. I really would love to go to the White House and help President Obama and his advisors know that this program will fail and we shouldn’t spend one more minute talking through it. But, if you are one of the 49 people this program may help, let me give you a basic overview of what refinancing a mortgage will look like under the new program.

The first requirements for eligibility sound like a dream come true, but make sure you read through to the end of this article to find the kicker. The program is structured similar to a FHA Streamline Refinance. To be eligible you must be current on your mortgage payments for the last six months and have missed no more than one payment in the six months before that. You will also be required to only have a credit score of 580, a job that is verified by your lender, and a conforming loan amount. If you have questions about what that amount is in your county, leave a comment with your email and zip code and I will get you that amount.

You will not need to get a new appraisal nor provide tax returns. If you are unemployed, then there will be more paperwork, but you will still be eligible for the refinancing. The announcement also included new pilot program to sell foreclosed properties to buyers who would convert them into rental housing, that and protection for homeowners from inappropriate foreclosures. I thought there were already laws on the books about that, but I digress.

The challenge with the program is that it requires Congressional approval. That. Will. Never. Happen. Why? Is it because Congress doesn’t care about you and I? Well, President Obama has proposed that this program will be paid for by a new tax on banks. I mean really? Does he think Congress will ever bring such a plan to a vote? It won’t even get out of committee. So what President Obama did was give a campaign speech and himself some talking points while running for reelection this summer and fall. This is not viable mortgage reform policy. It was a campaign speech wrapped around a message of false hope for the approximately 11.1 million households who are underwater on their loans.

I know I have talked about this for the last couple of weeks, but what needs to happen is Fannie Mae and Freddie Mac require reform. Like significant reform. Some people would like to shut both down and let the private sector take back over home loans. This plan would also be backed by the FHA, which is in serious need of reform because of solvency issues. The mountain of foreclosures in the system need to be cleared and banks are not proceeding with foreclosures until they have their administrative procedures in line with current best practices. You cannot expect the funds that hold mortgage-backed securities to take the brunt of the financial hit that will result from any type of principle reduction.

The Bottom Line: This policy proposal will result in absolutely nothing. This was a campaign speech and positioned Obama to say that he has tried mortgage relief but was blocked by Congress. If you are underwater on your mortgage, you need to wait to refinance until the market rebounds. If you need to move, you may be required to short sell your home if you want to get out of it. There is no meaningful mortgage reform on the horizon from the Obama Administration and if you think Congress is going to approve this package, I really wish you the best — if wishes were fishes then we would all be pretty stinky.

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