House Republicans are taking aim at four of the administration's foreclosure-prevention programs, arguing that they have failed to help many homeowners and are a waste of time and money.
Though the GOP has been critical in the past, House Financial Services Committee Chairman Spencer Bachus said Thursday that he plans to move quickly to terminate the programs, including the much-maligned Home Affordable Modification Program (HAMP).
"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," Bachus said. "These programs may have been well intentioned, but they're not working and, in reality, are making things worse."
The Alabama Republican is giving little time for lawmakers to debate the issue. The four bills will be the subject of a subcommittee hearing on March 2 and Bachus plans to follow up with a vote by the full committee March 3.
The Obama administration introduced Hamp two years ago in an effort to use Troubled Asset Relief Program funds to help as many as 3 million to 4 million troubled borrowers modify their mortgages. But the program's accomplishments have fallen well short of expectations, helping just more than half a million borrowers to date. The HAMP Termination Act, which is expected to be sponsored by committee member Rep. Patrick McHenry, R-N.C., would halt the Treasury Department's ability to facilitate modifications but preserve aid already granted through the program.
Three other bills would separately end the Neighborhood Stabilization Program, established in 2008 to support rehabilitation efforts in neighborhoods blighted by foreclosures; the Federal Housing Administration (FHA) Refinance Program, started last March to give FHA help to underwater borrowers; and the Emergency Mortgage Relief Program, which allocated $1 billion for homeowners who face challenges in paying their mortgages due to a job loss or medical issue.
"We need to stop funding programs that don't work with money we don't have," said Rep. Judy Biggert, R-Ill., the chairman of the insurance and housing subcommittee.
Democrats are already protesting the moves. Rep. Barney Frank of Massachusetts, the panel's ranking Democrat, said two programs targeted by the legislation — the Emergency Homeowner Relief Fund and the Neighborhood Stabilization Program — have merit.
"The attack on the Neighborhood Stabilization Program is an attack on cities," he said. "This program provides important funding to cities that have already been hit by the foreclosure crisis and allows them to cope with the blight, expense and destabilization that come with the presence of large numbers of empty properties."
The bills are the latest attempts by the new House GOP leadership to roll back crisis-response initiatives enacted in previous congresses. Several lawmakers have targeted provisions of the Dodd-Frank Act, and Rep. Michele Bachmann, R-Minn., has introduced a bill to repeal the regulatory reform law in its entirety.
Bachus is the second top Republican to target HAMP. Rep. Darrell Issa, the chairman of the House Oversight and Government Reform Committee, co-sponsored a bill last month that would terminate the program.
Though Republicans are likely to succeed in passing their bills through the House, they face an uphill battle in the Senate, which is controlled by Democrats.
Laurence Platt, a partner at K&L Gates, said the latest policy moves on foreclosure relief by both parties demonstrate just how far apart the two sides are. Though the GOP opposes government involvement in preventing foreclosures, President Obama has made it a priority, and his administration continues to plot ways to increase loan modifications. Several government agencies are pushing, for example, to include some new modification program as part of a pending settlement with servicers over foreclosure-processing problems.
"It's very ironic that the House Financial Services Committee is trying to defund borrower relief at the very time that the executive agencies and the state attorneys general are trying to force more borrower relief," Platt said. "If ever there's evidence of the key policy difference on what should be the role of government in helping distressed borrowers, this is it."
Cornelius Hurley, the director of the Morin Center for Banking and Financial Law at Boston University, said the GOP plan is too extreme.
"Can't we just pose the question: 'To what extent should the federal government subsidize or be involved in promoting housing?' Then we can just take a deep breath and come at it from a thoughtful approach," he said.
A legislative proposal to axe the programs, Hurley added, "sounds like pure politics."
"The Republicans clearly have a different view of housing and the extent to which it should be supported," he said. "I don't think the answer is a scorched-earth elimination."