The House Financial Services Committee said the panel will vote on a series of four bills March 3rd that would terminate government-backed loan modification/foreclosure prevention programs that have been called "failed and ineffective."
The first bill would kill the Home Affordable Modification Program (HAMP), which the Committee said has failed to help a sufficient number of distressed homeowners to justify its cost. The committee also will vote on additional bills to shut down a Federal Housing Administration refinancing program and a fund to stabilize neighborhoods suffering from heavy foreclosures, they said. A fourth bill would kill a program to provide 12-month emergency loans to homeowners to stave off foreclosures.
"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," committee Chairman Spencer Bachus said in a statement. "These programs may have been well intentioned but they're not working and, in reality, are making things worse.”
The bills face an uphill battle. If they clear the committee, they would have to be approved by the full House as well as by the Senate, which is controlled by Democrats. The Obama Administration also disagrees with the congressman saying they would close the door on struggling homeowners facing the worst housing crisis in generations.
The largest program, HAMP, has provided permanent loan modifications for 521,630 homeowners in the nearly two years it has been operating, but has fallen woefully short of it goal of helping 3 to 4 million borrowers. In addition, almost twice as many people have fallen out of their HAMP trial modifications than those who have completed them, forcing many into the foreclosure process.
HAMP provides cash incentives to mortgage servicing firms to lower monthly payments for borrowers to no more than 31 percent of their income. But only owner-occupants who can meet stringent documentation requirements for employment, income and acceptable overall debt levels can qualify, which has limited the program's reach. Many more borrowers have completed private loan modifications with their mortgage servicer than have received HAMP modifications due to less stricter requirements.
"The administration remains committed to reaching eligible homeowners to give them every opportunity to avoid foreclosure and will continue working to make our programs as effective as possible," an Obama administration spokesperson said.
Tags: HAMP, House Financial Services Committee, government-backed loan modifications, foreclosures, mortgage servicer, documentation requirements
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