A House subcommittee is scheduled to approve legislation to dismantle an array of federal programs aimed at helping homeowners avoid foreclosure. Among the programs the panel would end is the Obama administration’s troubled Home Affordable Modification Program (HAMP).
The House Financial Services Committee’s insurance, housing and community opportunity subcommittee is set Thursday to take up four separate bills.
“We need to break down barriers that have delayed the housing recovery, including expensive and ineffective government programs that have failed to help homeowners. Unfortunately, these programs were set up in haste, executed poorly, and have done little to restore stability in the marketplace,” says subcommittee Chairwoman Judy Biggert (R-Ill.). “A government program that spends more to save a single borrower than it costs to buy a home is no help at all – it’s just a waste of taxpayer money. We need to stop funding programs that don’t work with money we don’t have.”
Among the programs the subcommittee would send to the scrap heap is HAMP, President Obama’s signature program designed to stem the tide of foreclosures that has swept the nation in recent years.
That program has been plagued with a variety of reported problems, with banks modifying only a tiny percentage of mortgages in need. The government’s effort is unlikely to come anywhere close to meeting the administration’s stated goals of offering help to three to four million homeowners. It also seems unlikely to spend anywhere near the full $50 billion originally set aside for the program.
Meanwhile, the mortgage industry, too, has proven dysfunctional in carrying out the program.
Despite the eagerness of Republicans to kill HAMP and other mortgage-assistance initiatives, it’s not clear what, if anything, they would do to offer struggling homeowners more effective help to stay in their homes.
Industry figures show that more households than ever are in some stage of foreclosure, with more than 5 million mortgage holders now at risk of losing their homes, according to the Center for Responsible Lending (CRL), a Washington-based nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices.
Avoiding unnecessary foreclosures and encouraging loan modifications will be key to economic recovery, as the nation is sorely missing the jobs and growth provided by a healthy housing market, CRL says.
“When we’re in the midst of an epidemic, we don’t close all the hospitals—we work faster and harder to find a cure,” says CRL President Mike Calhoun. “We call on Congress to strengthen foreclosure prevention efforts by holding servicers accountable and requiring a review of every mortgage loan before foreclosures proceed.”
Mortgage loan servicers who implement HAMP and related programs are to blame for why help is so often too little too late, and without these programs, that problem would only worsen, CRL says. In fact, slipshod, unfair business practices among loan servicers are so rampant that all 50 state attorneys general and 11 federal agencies are now investigating.
CRL says it is urging Congress to defeat the bills.
Scott Nance is the publisher of the news site The Washington Current, formerly known as On The Hill. He has covered Congress and the federal government for more than a decade.