House Republicans: Failing mortgage-aid programs should go

McClatchy NewspapersMarch 8, 2011 

WASHINGTON — A handful of foreclosure prevention measures run by the Obama administration are so ineffectual, inefficient and complicated that, according to Republicans in the House of Representatives, the programs should be killed outright.

The House is scheduled to vote this week on getting rid of a refinance program for Federal Housing Administration loans and another program, scheduled to begin next month, that would help homeowners with delinquent payments.

The House Financial Services Committee is expected to vote Wednesday morning on ending two other measures: One of them is a massive effort that was designed to adjust up to 4 million mortgages but so far has tackled just half a million successfully. The other is the Neighborhood Stabilization Program, which steers money to communities hit hard by foreclosures.

The Treasury Department and many Democrats argue, though, that the programs — though flawed — are fixable, and consumer advocates say the measures offer the last, best hope for many struggling families.

"It's all we have," said Hazel Mack-Hilliard, the director of the mortgage foreclosure project with Legal Aid of North Carolina. "To have nothing and just say let the lenders do it, that's worse than nothing."

The bills' chances of becoming law are slight, because Democrats control the Senate and the Obama administration supports the programs. But Republicans say their effort will shine a light on inefficient programs that they say aren't working and, in the worst cases, do more harm than good.

Altogether, killing the programs could save the federal government a few billion dollars. But the real problem, said Rep. Patrick McHenry, R-N.C., is that families sometimes are hurt more than they're helped. McHenry will read from constituents' stories at Wednesday's committee meeting, telling of how homeowners were strung out on the hope of receiving mortgage modifications only to be told eventually that they didn't qualify.

In the meantime, he said, they've exhausted their savings, killed their credit and lost places to live.

"It's just heartbreaking stuff," McHenry said. He's sponsored the HAMP Termination Act, which aims to kill the Home Affordable Modification Program.

Through that program, the government pays banks and other servicers to adjust mortgages voluntarily. But of nearly $30 billion allocated to HAMP, only $1 billion has been spent.

Neil Barofsky, the special inspector general for the modification programs through the Troubled Asset Relief Program, told Congress last week that "HAMP has been beset by problems from the outset and, despite frequent retooling, continues to fall woefully short of meeting its original expectations."

He blamed the Treasury Department for refusing to adopt "meaningful goals and benchmarks" for the program, but he stopped short of saying the Home Affordable Modification Program should be shuttered altogether.

Treasury Secretary Timothy Geithner told Congress in separate testimony last week that he wants to keep the program.

The mortgage crisis isn't going away. Despite other signs of economic recovery, foreclosure filings across the country continue at a record pace. RealtyTrac, which tracks foreclosures around the U.S., predicts that filings will increase another 20 percent this year, topping 3 million, according to Barofsky's testimony.

Republicans' efforts to kill the assistance programs come as mortgage servicers are under congressional investigation for what Democrats describe as foreclosure fraud, robo-signing and other abuses.

At a hearing Tuesday in his home city of Baltimore, Rep. Elijah Cummings, the top Democrat on the House oversight committee, described the foreclosure crisis as a "wrecking ball" through the nation's communities.

Cummings said he was seeking documents from 10 mortgage-servicing companies: Bank of America, Wells Fargo & Co., JPMorgan Chase & Co., CitiMortgage Inc., Ally Bank/Residential Capital LLC, U.S. Bank Home Mortgage, SunTrust Bank, PHH Mortgage, PNC Mortgage/National City and MetLife Home Loans.

A report last month from the Congressional Research Service said servicers often had financial incentives to move ahead with foreclosures rather than modify mortgages, even when it wasn't in the best interests of the investors in the mortgages.

On Wednesday, the House is scheduled to begin debate on two measures: to kill the FHA Refinance Program and the Emergency Mortgage Relief Program.

The first, designed to refinance homes purchased under FHA loans, has resulted in the refinancings of just 22 homes as of the end of December, according to the Congressional Research Service. The second, meant to help homeowners who face delinquent payments, is scheduled to begin next month.

Votes in the full House are expected by the end of the week.

The other two bills — the HAMP Termination Act and the National Stabilization Program Termination Act — are expected to pass committee votes Wednesday. They could come to the House floor within a month.

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