WASHINGTON – The House Financial Services Committee voted to abolish President Barack Obama’s signature anti-foreclosure program, saying it failed to deliver the promised help to homeowners.
The panel voted on Wednesday along party lines, 32-23, to repeal the Home Affordable Modification Program, or HAMP, which pays lenders to rewrite loan terms to lower borrowers’ payments.
Beyond Cash Donations: How New Forms of Giving Are Transforming Not-for-Profit Accounting
Evolving Funding Landscape for Not-for-Profits Not-for-profit organizations are being asked to do more with less,…
Learn More
Representative Patrick McHenry, a North Carolina Republican, called the plan an “epic failure.”
The panel also voted 31-24 to end spending on the Neighborhood Stabilization Program, which gives federal money to states and localities to restore communities hit by foreclosures and abandoned properties.
The votes follow committee action last week to rescind two other housing aid programs, the Federal Housing Administration Short Refi Option, which seeks to aid homeowners whose home values have dropped below the amount owed on the mortgage, and the Emergency Homeowners Loan Program, which provides short-term loans to borrowers who have lost their jobs.
Republicans called the repeal effort a necessary step to reduce government spending and the federal deficit.
“There’s always a reason to help as long as you’re using someone else’s money to do it,” said Representative Scott Garrett, a New Jersey Republican. “We’re borrowing money to fund these programs, we’re going into debt to fund these programs. We have to say no.”
TARP Funds
The Treasury is projected to spend about a fourth of the $50 billion allocated for HAMP by the Troubled Asset Relief Program, according to the Congressional Budget Office. The program has spent about $1 billion so far. About 90 percent of the Neighborhood Stabilization Program has already been promised to local projects.
“We have people holding on by their fingernails, trying to keep their homes,” said Representative David Scott, a Democrat from Georgia. “To assassinate these programs and have nothing to take the place of them, how irresponsible is that?”
The full House is scheduled to vote on the FHA refinance repeal on Thursday and emergency loan repeals this week. President Barack Obama has threatened to veto the bills, which also face hurdles in the Democrat-controlled Senate.
Senate Republicans Jim DeMint of South Carolina, Bob Corker of Tennessee, both members of the Senate Banking Committee, and Tom Coburn of Oklahoma, on Wednesday introduced their own legislation to end HAMP.
Waning Support
While the attack on HAMP and other homeowner aid has been led by the Republicans, Democrat support also has been waning. This week, House Democrats sent a letter to Vice President Joe Biden saying that HAMP abandons distressed homeowners to “abusive” mortgage servicers. They said foreclosure problems have grown too urgent to wait for a legal settlement like the one being negotiated by regulators, the states and banks.
The letter, sent by 18 Democrats led by Representative George Miller of California, came after what Miller called an “unsatisfactory” session last week with Treasury Secretary Timothy F. Geithner and Housing and Urban Development Secretary Shaun Donovan.
HAMP, which draws funds from TARP, has helped more than 600,000 homeowners with permanent loan modifications in the past two years, far short of the 3 million to 4 million had promised to help. Foreclosure filings reached a record 2.9 million in 2010.
GAO Criticism
The program has been criticized by government watchdogs including the Government Accountability Office, the investigative arm of Congress.
Banks involved in modifying loans under HAMP have come under scrutiny for lapses in their foreclosure procedures. Unprepared for the record number of loan delinquencies brought on by the housing bubble burst, servicers have relied on inexperienced workers who failed to track paperwork or improperly signed thousands of legal documents. The so-called robo-signing practices prompted several lenders to temporarily suspend foreclosures last fall.
All 50 states and a federal task force are investigating at least 14 companies that conduct foreclosures. Federal agencies and a group of state attorneys general are negotiating a 27-page proposal for resolving the matter with Bank of America Corp., JPMorgan Chase & Co., Ally Financial Inc., Wells Fargo & Co. and Citigroup Inc.
Iowa Attorney General Tom Miller said any settlement is months away.
1 in 4 properties sold nationally as foreclosures last year. There is a shadow inventory of properties that have not hit the market. Nationwide, such properties have sold for discounts above 36%. The public needs to be educated with how the banks sell foreclosures. You think it’s supply and demand driven only? The decline in home values were first caused by the banks by WHO they gave mortgages to. Now they are now being perpetuated by HOW these very same banks sell the properties they have foreclosed on.
Guess what? These practices are causing a perpetual creation of a NEW class of distressed homeowners. For example, take “cookie cutter” communities with a few model name homes that have foreclosed properties that are sold for prices that make no logical sense. These non supply and demand factors cause homeowners to become underwater in their mortgages. Those seeking home equity lines of credit are denied. Some have had their home equity lines of credit terminated. Why? Because now IN ADDITION TO SUPPLY AND DEMAND FACTORS, homeowners are losing any equity they had because of how the banks are selling properties IN YOUR NEIGHBORHOOD. Think about the impact this has on all other areas of our economy. Those new kitchen cabinets, basement finishing projects, or outdoor deck projects are gone. Just ask your local contractor how good business is right now.
This is a logical extension of the robo signing scandal. The banks were ill prepared to deal with the number of foreclosures they had to process. Last year there were over 830,000 foreclosed properties sold, and this year we just don’t know the numbers because of the shadow inventory that has yet to hit the market. The banks have not built an infrastructure with how to properly sell foreclosures at maximum value. Until they do, these February numbers are but a “blip” and this housing crisis goes on as a perpetual problem.
We would be interested in any stories that you, your friends, or your neighbors may have experienced that speak to this.
E-mail us at stories@foreclosurefollies.com