House Republicans announced Thursday they plan to cut four costly programs they say have proven ineffective, starting with President Obama’s signature mortgage modification program.
When Congress returns from recess next week, the House Financial Services Committee will vote on legislation that would dismantle the Home Affordable Modification Program, and three other initiatives. “In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners,” said Financial Services Committee Chairman Spencer Bachus, R-Ala.
The HAMP program has been criticized for failing to meet expectations that it would help four million struggling homeowners fight foreclosure. Instead, the program has stopped only 520,000 foreclosures, mainly because lenders won’t cooperate.
The program was funded for $29 billion from a larger pot of money designated to help bail out Wall Street banks during the financial market meltdown of 2007. Only $840 million, less than 3 percent, of the money has been spent so far. According to the office of the inspector general overseeing those funds, the people who apply for HAMP modifications, “end up unnecessarily depleting their dwindling savings in an ultimately futile effort to obtain the sustainable relief promised by the program guidelines.”
Three other programs are also on the GOP’s chopping block.
Bachus said he wants to return to the Treasury Department $8 billion not yet disbursed to the Federal Housing Administration Refinance Program, which aims to help people who owe more on their mortgage than the value of their house. According to the GOP, only 35 applications have been submitted while $50 million has been issued to put the program in place.
The Emergency Mortgage Relief Program was signed into law last year as part of the Wall Street reform legislation. It provides $1 billion to the Department of Housing and Urban Development to help qualified people pay their mortgages for up to two years. Republicans say the program increases a borrower’s debt and should be eliminated.
Republicans also want to do away with the Neighborhood Stabilization Program, which they say suffers from poor oversight and may create “perverse incentives” for banks to foreclose on troubled borrowers.
Rep. Barney Frank, of Massachusetts, the top Democrat on the Financial Services Committee, said Republicans are trying to eliminate programs that help victims of the financial crisis and said his party, “will make the case that there are better ways for the federal government to cut spending than by attacking these programs.”
Matt Manning a foreclosure prevention counselor for AHEAD, a nonprofit housing development agency in northern New Hampshire, said the HAMP program “hasn’t lived up to expectations,” and has only helped about 14 percent of the 320 homeowners that have come to his organization for help.
“It would be nice if they actually put some strength behind it and made it work,” Manning said. “That would be the right solution, in my opinion.”
