The House Financial Services Committee voted Wednesday in favor of two bills that would terminate both the Home Affordable Modification Program and the Neighborhood Stabilization Program.
Since the government's loan modification program known as HAMP launched in March 2009, servicers offered 600,000 permanent modifications and placed 1.4 million borrowers at risk of foreclosure into a three-month trial. But critics on both sides of the aisle criticized HAMP for being too lax on servicers who have underperformed, and not meeting the original goal of reaching between 3 million and 4 million borrowers. The program was originally set to expire at the end of 2012.
The committee voted 31-24 to end NSP and 32-23 to end HAMP.
The bill does preserve the permanent and trial modifications under way, but Republicans shot down an amendment that would have protected borrowers who requested to be considered for HAMP.
Lawmakers differ along party lines over whether to continue the program, which has spent $1 billion of the $29 billion the Treasury set aside.
"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 Rep. Spencer Bachus (R-Ala.), chairman of the committee. "These programs may have been well-intentioned but they’re not working and, in reality, are making things worse."
In a statement released by the Treasury Department
Wednesday evening, Tim Massad, the assistant secretary for financial stability, said terminating the program would prevent tens of thousands of families from getting help every month and would relax pressure on mortgage servicers to offer that assistance.
"HAMP has been carefully designed to protect taxpayer interests. It does not apply to loans for vacant properties or second homes, and loans are modified only where it makes economic sense to do so," Massad said. "Taxpayer funds are only spent if homeowners make their payments. Keeping families in their homes on these terms is good for families, neighborhoods and our economy as a whole."
The committee also voted to dissolve the final $1 billion in funding through NSP, which has already awarded $6 billion in grants to local and state governments to buy, rehab and resell foreclosed and vacant property.
"There are no mandates on how the money is to be used. To take that money, give it to groups, whether it's cities, counties, they're going to love it," said Rep. Gary Miller (R-Calif.). "We have no oversight over the future. The money should have been put for a purpose and come back to the federal government. Other than that, it was a gift from the taxpayer."
However, Rep. Carolyn Maloney (D-N.Y.) said the program is working for American neighborhoods.
"We have to go through these empty houses and foreclosed houses to address the problem," Maloney said. "When mayors in the country are calling and saying this is helping us, then this is a program that should be continued and supported."
The House committee voted last week
to terminate the FHA Short Refi and HUD's Emergency Homeowner Loan Program. Those bills are scheduled go to the floor for a vote Thursday. However, the Obama administration said Tuesday night
that it would veto these two bills if Congress passed them.
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