No Lifeline: How Obama Betrayed Millions of Homeowners

By Dr. Potts, Editor-in-Chief, WPS News

Between 2010 and the end of Barack Obama’s presidency in 2017, an estimated 5 to 7 million American families lost their homes—a catastrophic displacement comparable only to the Great Depression (CoreLogic, 2017; Rugh & Massey, 2010). Yet this was not some unavoidable tragedy. It was the outcome of a cold, calculated political choice by Obama and his neoliberal team—a choice to save Wall Street, not Main Street.

The Numbers: Millions Lost, Millions Could Have Been Saved

According to data from CoreLogic (2017), 4.9 million foreclosures were completed from 2010 to 2016. When factoring in short sales and other exits, the total displaced households reach upwards of 7 million. Economists and policy watchdogs agree that at least 2 to 4 million foreclosures could have been prevented through proactive refinancing and principal reduction programs (Barofsky, 2012; Mian & Sufi, 2014).

Programs like the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP) were designed to help, but the reality was far from the administration’s claims. HAMP helped fewer than one million permanent modifications, well short of Obama’s promise to assist 3–4 million homeowners (GAO, 2016).

The Betrayal: Why Millions Were Sacrificed

This was no accident. The Obama administration explicitly chose to “foam the runway” for banks, a phrase admitted by Treasury Secretary Tim Geithner (Barofsky, 2012), meaning they deliberately spread foreclosures over time to protect financial institutions at the expense of families.

Why?

1. Moral Hazard as Moral Bankruptcy
   Obama’s team, including Larry Summers and Geithner, feared “rewarding failure” (Geithner, 2014). They insisted that principal reductions or widespread refinancing would encourage “strategic defaults.” This argument was economically baseless and morally indefensible. Millions of homeowners were current on their loans but trapped underwater, victims of a market collapse and servicer intransigence.
2. Deference to Wall Street
   Obama staffed his cabinet with Wall Street veterans who protected industry interests rather than public welfare. Eric Holder’s Department of Justice refused to prosecute senior executives responsible for mortgage fraud. Servicers, incentivized by foreclosure fees, often denied modifications, furthering the crisis (SIGTARP Reports, 2012).
3. Structural Constraints and Political Cowardice
   The securitization of loans tied servicers’ hands with complex contracts. The administration chose not to wield emergency powers to force reforms or implement national refinancing programs, fearing political backlash from both Wall Street and the right-wing opposition.

The Lie and the Silence

Obama promised a housing recovery that would “help people stay in their homes” (White House, 2009), but the numbers tell a different story. His administration’s failure to act decisively lied by omission—the public was told about hope and gradual progress, while millions faced eviction and ruin.

Judicial cramdowns—a powerful tool to reduce principal through bankruptcy—were abandoned quietly after pushback from financial elites. Meanwhile, Obama’s rhetoric preserved his image as a progressive, even as his policies cemented inequality.

Why Democrats Still Worship Obama

The political establishment clings to Obama’s legacy because it masks the neoliberal betrayal with charisma and intellect. His administration’s refusal to break Wall Street’s grip enabled the ongoing concentration of wealth and political power.

This reverence comes at the cost of ignoring the very real damage done to working-class communities, fueling political disillusionment and radicalization on both left and right.

Conclusion: Accountability Is Overdue

Obama’s administration could have saved millions of homes and fundamentally reformed a broken system. Instead, it chose the comfort of Wall Street bailouts and political expediency, leaving millions of Americans displaced and betrayed.

This is a moral and political failure that Democrats must confront honestly if they want to reclaim legitimacy with their base.

References

Barofsky, N. (2012). Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street. Free Press.

CoreLogic. (2017). National Foreclosure Report: Final 2016 Data. Retrieved from https://www.corelogic.com

Geithner, T. (2014). Stress Test: Reflections on Financial Crises. Crown Business.

Government Accountability Office. (2016). Troubled Asset Relief Program: Status of Programs and Lessons Learned from the Financial Crisis. GAO-16-341.

Mian, A., & Sufi, A. (2014). House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again. University of Chicago Press.

Rugh, J. S., & Massey, D. S. (2010). Racial Segregation and the American Foreclosure Crisis. American Sociological Review, 75(5), 629–651.

White House. (2009, February 18). Remarks by the President on the Home Mortgage Crisis. Retrieved from https://obamawhitehouse.archives.gov