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Politico: Foreclosure program in jeopardy

February 24, 2011
In The News

By Erika Lovley
It may be the end of the line for one of the President Barack Obama's key anti-foreclosure programs: the Home Affordable Modification Program (HAMP).

Financial Services Committee Chairman Spencer Bachus (R-Ala.) announced today that his committee will hold a subcommittee hearing and full committee markup of four bills that will "terminate failed and ineffective housing foreclosure programs", including HAMP – worth a total of $45 billion.

"It's time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners," 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 HAMP Termination Act would end the Treasury Secretary's ability to provide additional assistance under the program, but would maintain assistance already offered to homeowners.

Republicans argue that the program is not effective enough to justify its cost.

So far only $840 million of the $29 billion set aside for HAMP has been spent, Bachus said. Originally, 4 million homeowners were supposed to be helped. Instead, according to the Obama administration, only 521,630 loans have been permanently modified. The re-default rate has also been disappointingly high.

According to a report from the special inspector general for the Troubled Asset Relief Program, HAMP has even made some homeowners problems worse.

"[The] Treasury's claim that ‘every single person' who participates in HAMP gets ‘a significant benefit' is either hopelessly out of touch…or a cynical attempt to define failure as success," the inspector's report read.

The report found that people who applied for modifications through HAMP sometimes wound up drawn into failed trial modifications, leaving them with more outstanding money on their loans, worse credit scores, and less home equity. In some circumstances, people faced back payments, late fees and other penalties that they were unable to pay, even when they never missed a payment, resulting in the loss of their homes.

HAMP "continues to fall dramatically short of any meaningful standard of success," the inspector noted in a separate report.

However, at least one Democrat sounded off on Republicans today, scolding them for trying to end a program that she argues needs serious revamping, not slashing.

"I have consistently said for months now that the HAMP program has failed to help some homeowners. Unlike my colleagues on the other side of the aisle, who would replace it with nothing, I have consistently pushed for strong solutions," said Rep. Maxine Waters (D-Calif.) "Unlike the Republicans, I remain committed to legislative solutions that actually help people stay in their homes."

The committee will also consider the Neighborhood Stabilization Program, the FHA Refinance Program, and the Emergency Homeowner Relief Fund on March 2, with full committee markup on March 3.