Last week a House Financial Services Subcommittee voted to eliminate two programs designed to mitigate
the impact of the housing meltdown.
Republicans on the Committee voted unanimously to shut down the
Loan Program (EHLP) and FHA's Short-Refinance Option. EHLP is not scheduled to go into operation
until next month and the Short-Refi program got off to a slow start and has, as
yet assisted only a few homeowners but also has cost $0 in federal monies.
The next two housing recovery efforts on the chopping block: HAMP and the Neighborhood Stabilization Program. With the Committee scheduled to vote Wednesday
on the fate of both programs, supporters are beginning to fight back.
week representatives of the Administration testified to the Committee as to the
importance of the Home Affordable Modification Program (HAMP), a joint program
operated by Departments of Treasury and Housing and Urban Development. While HAMP has been plagued with problems, at
last count it had moved 600,000 borrowers into permanent loan modifications while
another 126,000 are in the required three month trial modification period. The so-called "HAMP Termination Act of
2011" (H.R. 839) would prohibit the Secretary of the Treasury from
providing any further assistance to the program but would allow assistance to
continue where a homeowner was in process with an offer to participate in the program.
Timothy G. Massad, acting assistant secretary of the Treasury, Office
of Financial Stability sent a letter to the Chairperson of the Committee Judy
Biggert, (R-IL) before last week's vote saying that terminating HAMP before the
end of 2012 would be a mistake.
"HAMP continues to help tens of thousands of additional families
every month with mortgage modifications that provide the typical borrower with
a $500 reduction in monthly mortgage payments.
Put simply, ending HAMP now, without a meaningful alternative in place,
would mean that struggling homeowners would have far fewer ways of coping with
the worst housing crisis in generations.
Instead, their fate would be left solely in the hands of the same
mortgage servicers whose standards are widely recognized to be in need of
Massad said that the value of HAMP has reached beyond the number of
permanent modifications. The program has
set affordability standards and developed a framework for how mortgage servicers
should assist those homeowners and set critical protections for
homeowners. It is also important to
understand, he said, the taxpayer funds are used only for homeowners in
permanent modifications and only when those homeowners continue to make their
On March 3 the New York Times
Editorial Board chimed in. "The ongoing crash," it said in an
editorial, "is further evidence that the government's antiforeclosure
efforts have fallen short and America's struggling homeowners need more help. So what are House Republicans proposing? They want the government to get out of the
antiforeclosure business altogether and leave homeowners to fend for
themselves. The result would be hundreds
of thousands of additional foreclosures and steeper price declines." They have, The Times said "introduced bills to eliminate four federal
antiforeclosure programs and replace them with - nothing."
The newspaper went through each of the threatened initiatives and their
accomplishments and laid out a brief primer on how each could be improved; HAMP
for example, by seeking legislation and regulation and stiffer penalties for
banks, with which "much of the problem lies," for "improper
delay and denial of modifications, excessive fees, and violations of borrowers'
The Neighborhood Stabilization Program (NSP) is the second program the
Committee will vote to end on Wednesday (H.B. 861). NSP, begun under the Bush
Administration, provides money to local governments and non-profits to buy and
rehabilitate abandoned and foreclosed properties and return them to the tax
rolls or to a non-profit use. The
Times said the $6 billion Congress appropriated for the program over the
last two fiscal years was simply not enough, it has all been obligated and
"House Republicans want to eliminate a third round of financing - $1
billion - promised in the financial reform law." The paper said that a Republican claim that
the program may provide a perverse incentive for banks to foreclose "is
absurd. Banks foreclose when they deem it in their interest, not because a
small federal program entices them."
The editorial also defended the two programs
that were voted down last week, refuting critics claims the that EHLP encouraged
indebtedness and stating that ending the FHA Short-Refi program, which has
resolved its early technical problem would squander an important chance to
prevent foreclosures. "All of the targeted programs
address serious unmet needs," The
Times said. "If House
Republicans get their way and shut these programs down, all Americans will pay
A third defense was published by Steve Adamske, Deputy Assistant Secretary for Public
Affairs at the U.S. Treasury Department on the Department's on-line blog. Adamske said HAMP was not designed to prevent
every single foreclosure, but terminating the program would mean that more
Americans would lose their homes, more families would have to endure the
painful process of foreclosure, there would be more vacant homes in communities
that are already suffering, and it would mean that the still-fragile housing
market and the nation's broader economic recovery would be put at greater risk.
If the Committee votes next week to terminate the second set of
programs, the bills must still pass a vote by the entire House, the democratically controlled Senate, and then a Presidential veto. The latter two sound unlikely based on rhetoric from the Administration.