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Dow Jones: House Votes To End Obama Foreclosure-Prevention Program

March 30, 2011
In The News

By Alan Zibel and Jeffrey Sparshott

The U.S. House voted Tuesday to end the Obama administration's main effort to assist troubled homeowners, with Republican lawmakers arguing that the program has failed to ease the foreclosure crisis.

The attempt to shut down the administration's flagship foreclosure-prevention effort, the Home Affordable Modification Program, or HAMP, is the last of four Republican attempts to shut down Obama administration efforts to prevent foreclosures or stabilize troubled neighborhoods.

None of the bills are expected to be taken up by the Democratic-controlled Senate, and President Barack Obama has threatened to veto all of them.

Nevertheless, the House's 252-170 vote to shut down the program helps Republicans convey their dissatisfaction with Obama administration interventions to prop up the U.S. economy.

Republicans argue that the program is costly to taxpayers at a time when budget cuts are needed to get the U.S. economy back on track. Republicans also say the government has failed to prevent many foreclosures and has, in some cases, left homeowners worse off.

The program "has hurt the very people it was intended to help" by giving them false hope, said Rep. Francisco Canseco (R., Texas). "We need to stop funding programs that don't work with money that we don't have," said Rep. Judy Biggert (R.. Ill).

Ending the foreclosure-prevention program would save taxpayers $1.4 billion over the next decade years, according to the Congressional Budget Office.

Democrats acknowledged that the program has experienced numerous problems, but said they are largely the fault of major lenders, also known as mortgage servicers. "This program has been run by the banks," rather than the government, said Rep. Brad Miller (D., N.C.) "This program can work if there are some tough rules that are really enforced."

When Obama launched the HAMP program two years ago, the administration said it would assist 3 million to 4 million troubled homeowners with reduced monthly mortgage payments. The program has fallen well short of that goal.

About 1.5 million modifications have been started so far. But more than half of the homeowners have dropped out. Only about 540,000 were enrolled in permanent loan modifications and were making their payments on time at the end of January.

Tim Massad, the Treasury Department's acting assistant secretary for financial stability, said Tuesday in a speech at Harvard University that the program " continues to provide much needed help to tens of thousands of new families each month."

Massad said the administration also plans to more stringently enforce the program's guidelines and will start to withhold financial incentives for mortgage servicers that receive a poor grade for treatment of consumers. The administration plans to publish a new quarterly scorecard for each of the 10 largest servicers.

Earlier in the week, House Democrats wrote a letter to Treasury Secretary Timothy Geithner, urging reforms to the troubled home-preservation effort. The program "must change in order to reach its potential in helping American families," Rep. Maxine Waters (D., Calif.) and 49 other lawmakers said in a letter to Geithner.

Democrats said the Treasury Department should mandate a single point of contact for borrowers as they seek loan modifications, require suspension of foreclosure proceedings while a request for modification is ongoing and establish an independent review of loan modification denials.

"These changes to mortgage servicing are needed not only for borrowers, but to ensure a fully-functioning mortgage market that protects investors and encourages the return of private capital," the Democratic lawmakers wrote.